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New Special Liquidity Scheme for NBFCs and HFCs

Published on May 21, 2020
Current Context: Ministry of Finance has decided to launch a new special liquidity scheme for Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs).
New Special Liquidity Scheme for NBFCs and HFCs
  • This proposal of new special liquidity scheme from FM minister has been approved by Union Cabinet chaired by PM Narendra Modi.
  • The scheme will help to improve liquidity position of NBFCs and HFCs.
  • As per the scheme, the Stressed Asset Fund (SAF) will be managed by setting up of a Special Purpose Vehicle (SPV).
  • That Stressed Asset Fund (SAF) will be considered which are guaranteed by Government of India and purchased by Reserve Bank of India only.
  • The SPV will proceed with the sale of such securities. And thus will acquire short- term debt for NBFCs and HFCs.
  • The new special liquidity scheme will work under the administration control of Department of Financial Services , Ministry of Finance and Government of India.
  • The SPV would issue the securities as per the requirement subject to the total amount of securities outstanding not exceeding Rs 30,000 crore to be extended by the amount required as per the need.
  • The securities that are issued by the SPV would be purchased by RBI. And the proceeds would be used by the SPV to acquire the debt of at least investment grade of the short duration of eligible NBFCs/HFCs.
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