The Union Cabinet on Monday approved a ₹30,000-crore special liquidity scheme for non-banking finance companies (NBFCs) and housing finance companies aimed at improving the cash position of these entities.
A special purpose vehicle (SPV) would be set up by a public sector bank 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 government said.
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.
“The SPV would issue securities as per requirement subject to the total amount of securities outstanding not exceeding ₹30,000 crore to be extended by the amount required as per the need,” a statement by the government said.
“The securities issued by the SPV would be purchased by the RBI and the proceeds thereof, would be used by the SPV to acquire the debt of at least investment grade of short duration (residual maturity of up to three months) of eligible NBFCs / HFCs,” it added.
Raman Aggarwal, co-chairman, FIDC, the industry body of NBFCs, termed the scheme a non-starter due to the short tenure of the funds.
“The details of the special liquidity scheme has come as a disappointment,” he said.
“The funds will be made available for a tenor of up to three months while a majority of the lending done is for a tenure of 2-3 years.
“In order to prevent any asset-liability mismatch, the expectation was for a tenure of three years,” said Mr. Aggarwal.