New Delhi (NVI): The Union Cabinet, chaired by the Prime Minister Narendra Modi, today approved the ‘Partial Credit Guarantee Scheme’ for the purchase of high-rated pooled assets from financially sound Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) by Public Sector Banks.
The decision behind the proposed government guarantee support and resultant pool buyouts is aimed to help address NBFCs/HFCs resolve their temporary liquidity or cash flow mismatch issues.
The scheme will enable NBFCs/HFCs to continue contributing to credit creation and providing last mile lending to borrowers, thereby spurring economic growth.
The Government of India (GoI) will offer ‘Partial Credit Guarantee Scheme’, as approved by the Union Cabinet, to PSBs for purchasing high-rated pooled assets from financially sound NBFCs and HFCs.
The amount of overall guarantee, as agreed by Department of Economic Affairs (DEA), will be limited to the first loss of up to 10 per cent of the fair value of assets being purchased by the banks under the scheme or Rs 10,000 crore, whichever is lower.
The scheme would cover NBFCs / HFCs that may have slipped into SMA-0 category during the one year period prior to 1.8.2018, and asset pools rated “BBB+” or higher.
Also, the window for one-time partial credit guarantee offered by Gol 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.
As per the decision the Finance Minister is delegated with the power to to extend the validity of the Scheme by up to three months taking into account its progress.
