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Govt issues norms for Rs 1L cr partial guarantee scheme for non-banking finance cos

Govt issues norms for Rs 1L cr partial guarantee scheme for non-banking finance cos

New Delhi: The Centre has issued guidelines on operationalising Rs 1-lakh crore partial guarantee scheme under which public-sector banks can purchase high-rated pooled assets of financially sound non-banking finance companies (NBFCs).

NBFCs, including housing finance companies (HFCs), came under stress following series of defaults by the group companies of IL&FS in September last year.

To help the sector come out of the stress, Finance Minister Nirmala Sitharaman in the Budget announced support for fundamentally sound NBFCs in getting continued funding from banks.

"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, the government will provide one-time six months' partial credit guarantee to public sector banks for first loss of up to 10 per cent," she had said. In pursuance of that the finance ministry last week released a detailed guidelines for this with the objective to address temporary asset liability mismatches of otherwise solvent NBFCs/HFCs without having to resort to distress sale of their assets for meeting their commitments.

The partial guarantee would help rework the Asset Liability structure within three months to have positive Asset Liability Management in each bucket for the first three months and on cumulative basis for the remaining period.

"At no time during the period for exercise of the option to buy back the assets, should the CRAR (capital to risk weighted assets ratio) go below the regulatory minimum. The promoter shall ensure this by infusing equity, where required," an official statement said.

As per the guidelines issued, the window for one-time partial credit guarantee will be for a period of six months, or till such date by which Rs 1 lakh crore assets get purchased by banks.

PTI

PTI

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