Government Approves Special Liquidity Scheme For Non-Banking Lenders

The government on Wednesday approved a special scheme to improve the liquidity position of non-banking finance companies (NBFCs) and housing finance companies (HFCs). Under the scheme the SBI Capital Markets (SBICAP), a subsidiary of the State Bank of India, will purchase short-term papers in the form of commercial papers (CPs) and non-convertible debentures (NCDs) from the shadow banks through a trust, Reserve Bank of India (RBI) said, in a release.

The proceeds from the scheme will be used to pay off their existing liabilities, the release also said.

However, RBI also enlisted certain conditions which the NBFCs/HFCs need to fulfill in order to avail the scheme. The lender's net non-performing assets (NPA) should not be more than 6 per cent as on 31 March, 2019 and it should have reported net profit in at least one of the last two financial years. Besides, the central bank has also listed certain regulatory body-related conditions.

In May this year, RBI governor Shaktikanta Das had met representatives of shadow banks and mutual funds to discuss issues such as the availability of liquidity from banks and other financial institutions, post-lockdown strategies for the supply of credit and implementation of the three-month moratorium on repayment of loan instalments.