Cabinet approves "Partial Credit Guarantee Scheme"

Published on December 13, 2019
Current context: The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval to the "Partial Credit Guarantee Scheme" for purchase of high-rated pooled assets from financially sound NBFCs/HFCs by PSBs.
Cabinet approves "Partial Credit Guarantee Scheme" 
  • Public Sector Banks (PSBs) can purchase high-rated pooled assets from financially sound Non-Banking Financial Companies (NBFCs) / Housing Finance Companies (HFCs):
    1. With the amount of overall guarantee being limited to first loss of up to 10 % of fair value of assets being purchased by the banks under the Scheme.
    2. Or Rs. 10,000 crore, whichever is lower, as agreed by Department of Economic Affairs (DEA). 
  • The scheme would cover NBFCs / HFCs that:
    1. May have slipped into SMA-0 category during the one year period prior to 1.8.2018, and
    2. Asset pools rated "BBB+" or higher.
  • The window for one-time partial credit guarantee will remain open till 30th June, 2020 or till such date by which Rs. 1 lakh crore assets get purchased by the Banks, whichever is earlier.
  • Finance Minister is given the power to extend the validity of the Scheme by up to three months taking into account its progress.
  • The Guarantee support will help address NBFCs/HFCs resolve their temporary liquidity or cash flow mismatch issues, enable them to continue contributing to credit creation etc.
  • The Finance Minister announced in the Budget 2019-20 that the Government will provide one time six months' partial credit guarantee to Public Sector Banks for first loss up to 10%, for purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of Rs 1 lakh crore during the current financial year.

Question: 

Q.1 The "Partial Credit Guarantee Scheme" for purchase of high-rated pooled assets from financially sound NBFCs/HFCs by PSBs covers NBFCs / HFCs that have? 
  1. Slipped into SMA-0 category during the one year period prior to 1.8.2018
  2. Asset pools rated "BBB+" or higher
a. Only 1
b. Only 2
c. Both 1 and 2
d. None of the above

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ramandeep singh

My name is Ramandeep Singh. I authored the Quantitative Aptitude Made Easy book. I have been providing online courses and free study material for RBI Grade B, NABARD Grade A, SEBI Grade A and Specialist Officer exams since 2013.

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