Hybrid Annuity Model (HAM):
- offers a lower but guaranteed rate of return to investors
- has been introduced by RBI to promote microfinance institutions in the country
Which of the above statements is/are correct?
First statement is correct. Second statement is incorrect because Hybrid Annuity Model is not associated with banking; in fact, it is associated with infrastructure financing by government. Till now, road projects in India were awarded via one of the three models: Build-Operate Transfer (BOT)-Annuity, BOT-Toll, and EPC (engineering, procurement and construction) contract. HAM is a mix between the existing two models – BOT Annuity and EPC. As per this model, the government will contribute to 40% of the project cost in the first five years through annual payments (hybrid annuity) which means the first 40% payment is made as fixed amount in five equal instalments whereas the remaining 60% will be paid as variable annuity amount after the completion of the project on the basis of assets created.
This question is a part of GKToday's Integrated IAS General Studies Module