Centre unveils `30,000 cr special liquidity scheme for NBFCS, HFCS

Under the scheme, investment will be made in both primary and secondary market in investment-grade debt papers of NBFCS, HFCS and MFIS

NEW DELHI: In a bid to provide funds to the stressed NBFC sector, Finance Minister Nirmala Sitharaman on Wednesday extended a Rs 30,000 crore special liquidity window for entities that are finding it difficult to raise money from the market amid the COVID-19 crisis.

Under this scheme, investment will be made in both primary and secondary market in investment-grade debt papers of non-bank finance companies (NBFCS), housing finance companies (HFCS) and microfinance institutions (MFIS).

"We have been hearing that NBFCS were not able to get enough resources despite efforts from government and RBI, especially those which were particularly not highly rated," the finance minister said.

She was addressing a press briefing here to provide details of the government's Rs 20 lakh crore stimulus package for the coronavirus-hit economy.

The scheme will supplement the Reserve Bank of India and government measures to augment liquidity by providing guarantee to investment grade securities, she added.

These NBFCS are mostly those which are financing MSMES, she said, adding this will provide liquidity support for NBFCS/HFCS/MFIS and mutual funds and create confidence in the market.

Further, a Rs 45,000 crore partial credit guarantee scheme 2.0 was also unveiled for NBFCS, HFCS and MFIS with low credit rating to help them extend loans to individuals and MSMES.

Even prior to the coronavirus crisis, the NBFC sector had been under stress. Immediately after the IL&FS crisis in September 2018, NBFCS faced severe liquidity crunch as mutual funds (MFS) stopped refinancing their loans.

The government had announced a series of measures including partial credit guarantee scheme (PCGS) in the last two Budgets.

The earlier scheme had certain restrictions which the government has decided to do away with as NBFCS, HFCS and MFIS with low credit rating require liquidity for fresh lending to MSMES and individuals.

The scheme announced in

Budget 2019-20 covered the liability side. The existing PCGS scheme will be extended to cover borrowings such as primary issuance of bonds/commercial papers (liability side of balance sheet) of such entities, she said.

First 20 per cent of loss will be borne by the guarantor, that is the government. She said that Aa-rated papers and below, including unrated papers, will be eligible for investment (especially relevant for many MFIS).

This scheme will result in liquidity of Rs 45,000 crore, the finance minister said.

The earlier PCGS was for purchasing high-rated pooled assets from financially sound NBFCS and HFCS.

This was to help address temporary liquidity or cash flow mismatch issues of otherwise solvent NBFCS or HFCS without them having to resort to distress sale of assets for meeting their commitments.

With regard to real estate, Sitharaman said state governments are being advised to invoke the force majeure clause under the Real Estate (Regulation and Development) Act (RERA).

The registration and completion date for all registered projects will be extended by up to six months and may be extended by another three months based on the state's situation. Various statutory compliances under RERA will also be extended concurrently.

Talking about the progress of the Rs 1.70 lakh crore Pradhan Mantri Garib Kalyan Yojana, the finance minister said about 52,300 crore has been disbursed through direct benefit transfer to about 41 crore beneficiaries.

The government has frontloaded Rs 2,000 paid to farmers under the existing PM-KISAN scheme to benefit 8.7 crore farmers, she added.