Union Cabinet has approved the new Special Liquidity Scheme for Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs). The scheme aims to improve the liquidity position of the NBFCs/HFCs.
The Government has proposed a framework for addressing the liquidity constraints of NBFCs/HFCs through a Special Liquidity Scheme.
As per the scheme, a Special Purpose Vehicle (SPV) would be set up to manage a Stressed Asset Fund (SAF) whose special securities would be guaranteed by the Government of India (GoI) and purchased by the Reserve Bank of India (RBI) only.
The SPV will proceed with the sale of such securities to acquire short-term debt of NBFCs/HFCs.
The Scheme will be administered by the Department of Financial Services, MoF. GoI will issue the detailed guidelines.
A large public sector bank would set up an SPV to manage a stressed asset fund that would issue interest-bearing special securities guaranteed by the Government of India, to be purchased by 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 that are issued by the SPV would be purchased by RBI. And the proceeds would be used by the SPV to acquire the debt of at least investment grade of the short duration of eligible NBFCs/HFCs.
