RBI announces special liquidity scheme for NBFCs and HFCs through SPV

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News: Reserve Bank of India(RBI) has operationalised the Rs 30,000 crore special liquidity scheme for non-banking finance companies (NBFCs) and Housing finance companies(HFCs). 

Facts:

  • Aim: To improve the liquidity position of non-banking finance companies (NBFCs) and housing finance companies(HFCs).
  • Under the scheme, a Special Purpose Vehicle (SPV) has been set up to manage a Stressed Asset Fund (SAF) of the NBFCs/ HFCs.
  • The SPV will issue securities which would be guaranteed by the Government of India and purchased by the Reserve Bank of India (RBI) only.
  • The proceeds of sale of such securities would be used by the SPV to acquire short-term debt of NBFCs/HFCs.
  • The Scheme will be administered by the Department of Financial Services (Ministry of Finance).

Eligibility Conditions for NBFCs/HFCs to avail this scheme:

  • All investment grade RBI-registered NBFCs excluding Core Investment Companies(CICs) and NHB-registered HFCs are eligible.
  • Capital adequacy ratio(CAR) of NBFCs/HFCs should not be below the regulatory minimum, i.e 15% and 12% respectively as on March 31, 2019.
  • Net non-performing assets should not be more than 6% as on March 31, 2019.
  • They should have made profits in at least one of the last two financial years.
  • They should not have been reported under SMA-1 or SMA-2 category by any bank for their borrowings during the last one year prior to August 1, 2018