RBI sets rules for liquidity scheme
MUMBAI: The Reserve Bank of India (RBI) on Wednesday laid down the eligibility criteria for non-bank financiers and mortgage lenders to utilise a special liquidity scheme that was approved by the Union cabinet in May.
To borrow funds, the RBI rules mandatethatnon-bankingfinancial companies (NBFCs) and housing finance companies (HFCs) should not have net nonperforming assets of more than 6% as on March 31, 2019 and the funds raised will have to be solely used to extinguish existing liabilities.
“They should (also) have made net profit in at least one of the last two preceding financial years of 2017-18 and 2018-19. They should not have been reported under SMA-1 or SMA-2 category by any bank for their borrowings during last one year prior to 1 August 2018,” RBI said.
Banks classify borrowers into special mention accounts based on their delay in repaying loans. Special mention account-0 (SMA-0) loans are where the payment overdue is between one and 30 days, SMA-1 between 31 and 60 days and SMA-2 from 61 to 90 days. The asset is termed nonperforming after being overdue for 90 days.
Non-bank financiers have been under pressure for some time now.
The risk aversion of banks and the subsequent liquidity crunch faced by non-banks began after Infrastructure Leasing and Financial Services Ltd (IL&FS) defaulted on its payment obligations in September 2018.
Under the government proposal, a special purpose vehicle (SPV) has been set up to manage a stressed asset fund where the securities will be guaranteed by the government.
The SPV would issue securities of up to ₹30,000 crore and these would be purchased by RBI.
The funds thus received from the sale of securities would be used by the SPV to buy shortterm investment-grade papers from eligible NBFCs and HFCs, providing them with some liquidity.
RBI said on Wednesday that as per the government decision, SBI Capital Markets, a unit of State Bank of India (SBI), has set up a SPV to manage this operation.