Spl liquidity scheme for NBFCs rolled out

The Reserve Bank of India (RBI) on Wednesday announced the conditions for the non-banking finan-ce companies (NBFCs) and housing finance companies (HFCs) for availing the benefit of the government’s special liquidity scheme under special purpose vehicle (SPV). As per the government’s decision, SBI Cap, a subsidiary of the State Bank of India, has set up an SPV to manage this operation.

Under the scheme, the SPV will purchase the short-term papers from eligible NBFCs/HFCs, who shall utilise the proceeds under this scheme solely for the purpose of extinguishing existing liabilities.

The instruments will be CPs and NCDs with a residual maturity of not more than three months and rated as investment grade.

The facility will not be available for any paper issued after September 30, 2020 and the SPV would cease to make fresh purchases after September 30, 2020 and would recover all dues by December 31, 2020; or as may be modified subsequently under the scheme said the central bank.

“The Government of India has approved a scheme to improve the liquidity position of NBFCs/ HFCs through a Special Purpose Vehicle to avoid any potential systemic risks to the financial sector,” said the RBI in a statement.

All NBFCs and HFCs, excluding Core Investment Companies (CIC), would be eligible for SBI's SPV arrangement.

Specifying the eligibility criteria for the NBFCS and HFCs the central bank said that the those NBFCs and HFCs whose Capital Risk Adequacy Ratio (CRAR) is 15 per cent or above as on March 31, 2019, will be eligible for this special liquidity arrangement. The companies seeking the benefits should have made profits in at least one of the last two preceding financial years--2017-18 and 2018-19.

“They should not have been reported under SMA-1 or SMA-2 category by any bank for their loans,” the RBI said.