Cabinet approves 'Partial Credit Guarantee Scheme'
New Delhi [India], Dec 11 (ANI): The Union Cabinet, chaired by Prime Minister Narendra Modi, has given its approval to the Partial Credit Guarantee Scheme.
ANI
Dec 11, 2019 19:37 IST
New Delhi [India], Dec 11 (ANI): The Union Cabinet, chaired by Prime Minister Narendra Modi, has given its approval to the Partial Credit Guarantee Scheme.
The scheme, to be offered by the Central government to Public Sector Banks (PSBs) for purchasing high-rated pooled assets from financially sound Non-Banking Financial Companies (NBFCs)/Housing Finance Companies (HFCs), with the amount of overall guarantee being limited to first loss of up to 10 per cent of fair value of assets being purchased by the banks under the Scheme, or Rs 10,000 crore, whichever is lower, as agreed by Department of Economic Affairs (DEA), read a statement.
The scheme would cover NBFCs/HFCs that may have slipped into SMA-0 category during the one year period prior to August 1, 2018, and asset pools rated "BBB+" or higher.
Window for one-time partial credit guarantee offered by the Centre will remain open till June 30, 2020 or till such date by which Rs 1,00,000 crore assets get purchased by the banks, whichever is earlier. Power has been delegated to the Finance Minister to extend the validity of the scheme by up to three months taking into account its progress.
As per the statement, the proposed government guarantee support and resultant pool buyouts will help address NBFCs/HFCs resolve their temporary liquidity or cash flow mismatch issues, and enable them to continue contributing to credit creation and providing last mile lending to borrowers, thereby spurring economic growth.
The scheme is offered to PSBs with the objective that the purchase of pooled assets enabled by government guarantee support under the scheme, will help addressing temporary liquidity/cash flow mismatch issues of otherwise solvent NBFCs/HFCs without them having to resort to distress sale of their assets for meeting their commitments, the statement added.
This will provide liquidity to the NBFC/HFC concerned for financing the credit demand of the economy, and also protect the financial system of the country from any adverse contagion effect that may arise due to the failure of such NBFCs/HFCs. (ANI)
Get the App
