Govt issues scheme to provide liquidity support to NBFCs, MSMEs
New Delhi, Aug 14 (KNN) Aiming to meet the financial requirements of productive sectors of economy including Micro Small and Medium Enterprises (MSME), retail and housing, government has issued a scheme regarding partial credit guarantee that would enable the public sector banks (PSBs) to purchase pooled assets of financially sound NBFCs amounting to Rs 1 lakh crore.
It is expected that this measure would provide liquidity to the NBFC Sector and, in turn, enable them to continue to play their role in meeting the financing requirements of the productive sectors of economy including MSMEs, retail and housing.
The objective of this one-time facility, which will be open for six months or till such date that assets worth Rs 1-lakh crore are purchased by banks, whichever is earlier, is to address temporary asset-liability mismatches of otherwise solvent NBFCs/HFCs without resorting to distress sale of their assets to meet commitments. The partial credit guarantee was to cover the first loss of up to 10 per cent.
All NBFCs registered with the RBI excluding those registered as MFIs and core investment companies would be eligible for the facility. They should have made net profit in at least one of the last two preceding financial years (2017-18 and 2018-19). Besides other conditions, their net NPA should not be more than six 6 per cent as of March 31, 2019.
All HFCs registered with the National Housing Bank and meeting the conditions of net profit, NPAs (less than 6 per cent) will be eligible for the facility. MFIs and core investment companies are not covered under the scheme, said the Finance Ministry has said.
The scheme stipulates that assets originated up to March 31 this year will only be eligible under this scheme. Assets should be standard in the books of NBFCs/HFCs on the date of sale. The pool of assets should have minimum rating of ‘AA’ or equivalent at fair value prior to the partial credit guarantee by the government.
The entire process of execution of the partial credit guarantee will happen through SIDBI. The public sector bank concerned will have to submit the proposal for execution of guarantee under the scheme to SIDBI along with rating details.