Govt OKs scheme to give liquidity to NBFC, home fin cos

RBI: Liquidity window for non-banks to operate via SBI CAP special purpose vehicle

The Reserve Bank of India (RBI) on Wednesday said the Centre has approved a scheme to improve the liquidity position of non-banking finance companies (NBFCs) and Housing Finance Companies (HFCs) through a special purpose vehicle (SPV) to avoid any potential systemic risks to the financial sector.

To be eligible under the scheme, RBI has laid out eight conditions which are --1 NBFCs including microfinance in stitutions that are registered with the RBI under the Reserve Bank of India Act ,1934, excluding those registered as Core Investment Companies 2 Housing Finance Companies that are registered under the National Housing Bank Act, 1987 3 CRAR/ CAR of NBFCs/HFCs should not be below the regulatory minimum, that is , 15 per cent and 12 per cent respectively as on March 31, 2019 4 The n et non -performing assets should not be more than 6 percent as on March 31,20195 They should have made net profit in at least one of the last two preceding financial years (that is, 2017 -18 and 2018-19 ) 6 T hey should not h ave been r eported under SMA-1 or SMA-2 category by an y bank f or their borrowings during last one year prior to August 1,20187 They should be rated investment grade by a SEBI registered rating agency 8 They should comply with the requirement of the SPV for an appropriate level of collateral from the entity, which, however, would be optional and to be decided by the SPV.

The RBI said as per the government decision, SBICAP which is a subsidiary of the State Bank of India h as set up a SPV (SLS Trust) to manage this operation.

The SPV will purchase the short-term papers from eligible NBFCs/HFCs, w ho shall util ise 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 fr es hp urchases after September 30,2020 and would recover all dues by December 31, 2020; or as may be modified subsequently under the scheme.