(The Gist of PIB) Special Liquidity Scheme for NBFCs/HFCs

[JUNE-2020]

The Union Cabinet has approved the proposal of the Ministry of Finance to launch a new Special Liquidity Scheme for Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) to improve the liquidity position of the NBFCs/HFCs.

A large public sector bank would set up a Special Purpose Vehicle (SPV) to manage a Stressed Asset Fund (SAF) whose special securities would be guaranteed by the Government of India and purchased by the Reserve Bank of India (RBI) only.
The SPV would issue securities as per requirement subject to the total amount of securities outstanding not exceeding Rs. 30,000 crore to be extended by the amount required as per the need.
The securities issued by the SPV would be purchased by RBI and proceeds thereof would be used by the SPV to acquire the debt of at least investment grade of short duration (residual maturity of up to 3 months) of eligible NBFCs / HFCs.
The Scheme will be administered by the Department of Financial Services.
The direct financial implication for the Government is Rs. 5 crores, which may be the equity contribution to the Special Purpose Vehicle (SPV).