Mumbai: Finance Secretary Rajiv Kumar said the government is in the process of approving Rs 20,000-crore of lifeline to the fund-starved NBFCs under the partial credit guarantee scheme announced in the budget. The budget had proposed a partial credit guarantee scheme worth Rs 1 lakh crore under which public sector banks would buy high-rated pooled assets of financially sound NBFCs, including housing finance companies, amounting to Rs 1 lakh crore this year under which government will provide a one-time six months partial credit guarantee to public sector banks for first loss of up to 10 percent. The measure was announced to help ease the tight liquidity condition that shadow banks have been facing since the fall of segment major IL&FS in September 2018.
“We have supporting sanctions of over Rs 20,000 crore and the guarantee is being extended,” Kumar told reporters on the sidelines of the 101st foundation day of state-run Union Bank of India here this evening. He said some of the formalities are being worked now post which the scheme will get rolling. Kumar said banks have been buying pooled assets since August last year after defaults by IL&FS began.
He said since the past five years, the government has been cleaning up the balance sheets of all financial sector players, such as public and private sector banks, all India financial institutions, NBFCs, cooperative banks, auditors and rating agencies. “There is no way that the system can be gamed now,” he warned. It can be noted that in August, government had issued guidelines to operationalise Rs 1-lakh crore partial guarantee scheme under to address temporary asset-liability mismatches of otherwise solvent NBFCs/HFCs.
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 a cumulative basis for the remaining period. “At no time during the period for the exercise of the option to buy back the assets, should the 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 on 19 August.
As per the guidelines issued, the window for a one-time partial credit guarantee will be for six months, or till such date by which Rs 1 lakh crore assets get purchased by banks. Assets originated up to 31 March 2019 will only be eligible under this scheme, it said, adding assets should be standard in the books of NBFCs/HFCs on the date of sale.