Govt announces special liquidity scheme to support stressed NBFCs

Govt announces special liquidity scheme to support stressed NBFCs

Finance Minister Nirmala Sitharaman announced a special liquidity scheme to the tune of Rs 30,000 crore for stressed non-banking financial companies (NBFC), housing finance companies (HFCs) and microfinance companies (MFIs).

Sitharaman said that since NBFCs and other small financing companies have been finding it hard to raise money in the debt market, the government will launch the special liquidity scheme.

“Under this scheme, the investment will be made in both primary and secondary market transactions in investment-grade debt paper of NBFCs/HFCs/MFIs,” she said.

It will also supplement RBI and government measures to boost liquidity and securities will be “fully guaranteed” by the government.

“This will provide liquidity support for NBFCs/HFC/MFIs and mutual funds and create confidence in the market,” she said.

Partial Credit Guarantee Scheme 2.0

Those NBFCs, HFCs and MFIs with low credit rating find it difficult to lend to MSMEs, therefore disrupting the entire economic cycle.

To help NBFCs lend smoothly to MSMEs, the existing Partial Credit Guarantee Scheme (PCGS) to be extended to cover borrowing such as primary insurance of bonds/CPs of such entities.

“First 20 per cent of loss will be borne by the guarantor ie., Government of India. AA paper and below including unrated paper eligible for investment. This scheme will result in liquidity of Rs 45,000 crores,” she said.

The government has also announced a slew of measures for the stressed MSME sector, which has been hit hard due to the coronavirus lockdown.

Sitharaman also announced tax concessions and liquidity support for several sectors as part of the government’s Rs 20 lakh crore economic relief package.