{"id":229910,"date":"2020-05-21T11:00:11","date_gmt":"2020-05-21T05:30:11","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=229910"},"modified":"2023-10-03T17:29:10","modified_gmt":"2023-10-03T11:59:10","slug":"cabinet-approves-special-liquidity-scheme-for-nbfcs-hfcs-to-address-their-liquidity-stress","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2020\/05\/21\/cabinet-approves-special-liquidity-scheme-for-nbfcs-hfcs-to-address-their-liquidity-stress\/","title":{"rendered":"Cabinet approves Special Liquidity Scheme for NBFCs\/HFCs to address their Liquidity Stress"},"content":{"rendered":"<p style=\"text-align: justify;\">Union Cabinet, has given its approval to the proposal of the Ministry of Finance to launch<\/p>\n<blockquote><p><span style=\"color: #ff0000;\">a new Special Liquidity Scheme for Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) to improve liquidity position of the NBFCs\/HFCs.<\/span><\/p><\/blockquote>\n<p style=\"text-align: justify;\"><strong>Financial implication:<\/strong><\/p>\n<p style=\"text-align: justify;\">The direct financial implication for the Government is Rs. 5 crore, which may be the equity contribution to the Special Purpose Vehicle (SPV). Beyond that, there is no financial implication for the Government until the Guarantee involved is invoked. However, on invocation, the extent of Government liability would be equal to the amount of default subject to the Guarantee ceiling. The ceiling of aggregate guarantee has been set at Rs. 30,000 crore, to be extended by the amount required as per the need.<\/p>\n<p style=\"text-align: justify;\"><strong>Details of the Scheme:<\/strong><\/p>\n<p style=\"text-align: justify;\">The Government has proposed a framework for addressing the liquidity constraints of Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) through a Special Liquidity Scheme. An SPV would be set up to manage a Stressed Asset Fund (SAF) whose special securities 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, which will issue the detailed guidelines.<\/p>\n<p style=\"text-align: justify;\"><strong>Implementation schedule:<\/strong><\/p>\n<p style=\"text-align: justify;\">A large public sector bank would set up an SPV to manage a stressed asset fund which would issue interest bearing special securities guaranteed by the Government of India, to be purchased by RBI only. The SPV would issue securities as per 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 issued by the SPV would be purchased by RBI and proceeds thereof would be used by the SPV to acquire the debt of at least investment grade of short duration (residual maturity of upto 3 months) of eligible NBFCs \/ HFCs.<\/p>\n<p style=\"text-align: justify;\"><strong>Impact:<\/strong><\/p>\n<p style=\"text-align: justify;\">Unlike the Partial Credit Guarantee Scheme which involves multiple bilateral deals between various public sector banks and NBFCs, requires NBFCs to liquidate their current asset portfolio and involves flow of funds from public sector banks, the proposed scheme would be a one-stop arrangement between the SPV and the NBFCs without having to liquidate their current asset portfolio. The scheme would also act as an enabler for the NBFC to get investment grade or better rating for bonds issued. The scheme is likely to be easier to operate and also augment the flow of funds from the non-bank sector.<\/p>\n<p style=\"text-align: justify;\"><strong>Benefits:<\/strong><\/p>\n<p style=\"text-align: justify;\">It has been announced in the Budget Speech of 2020-21 that a mechanism would be devised to provide additional liquidity facility to NBFCs\/HFCs over that provided through the PCGS. This facility would supplement the liquidity measures taken so far by the Government and RBI. The Scheme would benefit the real economy by augmenting the lending resources of NBFCs\/HFCs\/MFls.<\/p>\n<p style=\"text-align: justify;\"><strong>Background:<\/strong><\/p>\n<p style=\"text-align: justify;\">It has been announced in the Budget Speech of 2020-21 that a mechanism would be devised to provide additional liquidity facility to NBFCs\/HFCs over that provided through the Partial Credit Guarantee Scheme (PCGS).\u00a0 There is an urgency to implement the above Budget announcement to strengthen financial stability on account of the emerging situation of Covid-19.<\/p>\n<hr \/>\n<p style=\"text-align: justify;\">Cabinet<\/p>\n<p style=\"text-align: right;\"><strong>[Press Release dt. 21-05-2020]<\/strong><\/p>\n<p>[Source:PIB]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Union Cabinet, has given its approval to the proposal of the Ministry of Finance to launch a new Special Liquidity Scheme for <\/p>\n","protected":false},"author":8808,"featured_media":209514,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[29535,4],"tags":[41362,39924,41514,41512,41515,2945,41513],"class_list":["post-229910","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cabinet_decisions","category-legislationupdates","tag-20-lakh-crore-package","tag-covid-19","tag-financial-economic-package","tag-hfc","tag-liquidity-stress","tag-NBFC","tag-special-liquidity-scheme"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.4 (Yoast SEO v26.4) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Cabinet approves Special Liquidity Scheme for NBFCs\/HFCs to address their Liquidity Stress | SCC Times<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, 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The decision has been taken in pursuance of the Budget announcements for 2019-20 by Union Finance & Corporate Affairs Minister Smt. 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The Central Government has since issued notification appointing August 09, 2019 as the date on which the relevant part\u2026","rel":"","context":"In &quot;Legislation Updates&quot;","block_context":{"text":"Legislation Updates","link":"https:\/\/www.scconline.com\/blog\/post\/category\/legislationupdates\/"},"img":{"alt_text":"rbi","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/reserve-bank-of-india.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/reserve-bank-of-india.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/reserve-bank-of-india.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/reserve-bank-of-india.jpg?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":322898,"url":"https:\/\/www.scconline.com\/blog\/post\/2024\/05\/24\/whether-housing-finance-company-recover-loan-amount-less-than-%e2%82%b920-lakh-under-sarfaesi-act-mp-high-court-answers-scc-times\/","url_meta":{"origin":229910,"position":3},"title":"Whether Housing Finance Company can recover loan amount of less than \u20b920 lakh under SARFAESI Act? MP High Court answers","author":"Ritu","date":"May 24, 2024","format":false,"excerpt":"MP High Court held that the writ petition is maintainable due to the pure legal questions involved regarding the applicability of SARFAESI Act provisions to HFCs for amounts below the Rs. 20 Lakhs threshold.","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Madhya Pradesh High Court","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/Madhya-Pradesh-High-Court.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/Madhya-Pradesh-High-Court.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/Madhya-Pradesh-High-Court.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2024\/03\/Madhya-Pradesh-High-Court.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":250479,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/06\/30\/rbi-issues-guidelines-on-declaration-of-dividends-by-nbfcs\/","url_meta":{"origin":229910,"position":4},"title":"RBI issues guidelines on declaration of dividends by NBFCs","author":"Prachi Bhardwaj","date":"June 30, 2021","format":false,"excerpt":"The Reserve Bank of India has issued circular dated June 24, 2021 prescribing the guidelines on distribution of dividend by NBFC\u2019s. The guidelines shall be applicable to all NBFCs regulated by RBI and shall be effective for declaration of dividend from the profits of the financial year ending March 31,\u2026","rel":"","context":"In &quot;Legislation Updates&quot;","block_context":{"text":"Legislation Updates","link":"https:\/\/www.scconline.com\/blog\/post\/category\/legislationupdates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":229437,"url":"https:\/\/www.scconline.com\/blog\/post\/2020\/05\/13\/finance-minister-may-announce-details-of-rs-20-lakh-crore-relief-announced-by-prime-minister-stay-tuned\/","url_meta":{"origin":229910,"position":5},"title":"BREAKING | Decoding of Rs 20 Lakh Crore Economic Package| New Definition of MSMEs; Tax filing due date extended to 30th November, 2020","author":"Bhumika Indulia","date":"May 13, 2020","format":false,"excerpt":"Background: Amidst the Corona crisis, PM announced\u00a0 a special economic package with a new resolution. This economic package will serve as an important link in the 'AtmaNirbhar Bharat Abhiyan\u201d (Self Reliant India Campaign)'. What the Prime Minister said about the package? In the recent past economic announcements made by the\u2026","rel":"","context":"In &quot;Business News&quot;","block_context":{"text":"Business News","link":"https:\/\/www.scconline.com\/blog\/post\/category\/news\/business_news\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/05\/ECONOMIC-PACKAGE.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/05\/ECONOMIC-PACKAGE.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/05\/ECONOMIC-PACKAGE.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/05\/ECONOMIC-PACKAGE.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2020\/05\/ECONOMIC-PACKAGE.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/229910","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/8808"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=229910"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/229910\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/209514"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=229910"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=229910"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=229910"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}