FinMin notifies partial credit guarantee scheme to PSBs
- By NewsOnFloor Staff
- Aug 13, 2019
- 79 views
New Delhi, Aug 13 (IANS) The Finance Ministry on Tuesday notified the partial credit guarantee scheme to PSBs for purchasing high-rated pooled assets from financially sound NBFCs and HFCs to operationalise the Budget announcement with guidelines.
"The step would provide liquidity to NBFCs and enable them to continue to play their role in meeting the financing requirements of productive sectors of economy", the Ministry said.
In pursuance of the announcement made in the Union Budget, the government has issued a scheme on partial credit guarantee. The scheme would enable the public sector banks (PSBs) to purchase pooled assets of financially sound NBFCs amounting to Rs one lakh crore.
It is expected that this measure would provide liquidity to the NBFC Sector and, in turn, enable them to continue to play their role in meeting the financing requirements of the productive sectors of economy including MSME, retail and housing, said the Ministry.
The Budget announcement was "for purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of Rs one lakh crore during the current financial year. Government will provide one-time six months' partial credit guarantee to PSBs for first loss of up to 10%."
The operational guidelines say the assets shall be purchased by banks at fair value and must be rated by credit rating agencies (CRAs) accredited by Reserve Bank of India (RBI). The one-time guarantee provided by the government on the pooled assets will be valid for 24 months from the date of purchase and can be invoked on the occurrence of default.
The guarantee shall cease earlier if the purchasing bank sells the pooled assets to the originating NBFC/HFC or any other entity, before the validity of the guarantee period.
The NBFCs/HFCs can have the option to buy back their assets after a specified period of 12 months as a repurchase transaction on a right of first refusal basis.
Assets originated up to Macrh 31, 2019 will only be eligible under this scheme.
Assets should be standard in the books of NBFCs/HFCs on the date of sale. The pool of assets should have minimum rating of 'AA' or equivalent at fair value prior to the partial credit guarantee by GoI.
NBFCs/HFCs can sell up to a maximum of 20% of their standard assets as on March 31, 2019 subject to a cap of Rs 5,000 crore at fair value. Any additional amount above the cap of Rs 5,000 crore will be considered on pro rata basis, subject to availability of headroom.
The underlying assets should represent the debt obligations of a homogeneous pool of obligors and individual asset size in the pool is capped at Rs 5 crore.
At no time during the period for exercise of the option to buy back the assets, should the CRAR go below the regulatory minimum. The promoter shall ensure this by infusing equity, where required.
The validity of the scheme is six months. "The window for one-time partial credit guarantee offered by the government will open from the date of issuance of the Scheme by the Government for a period of six months, or till such date by which Rs One lakh crore assets get purchased by banks, whichever is earlier", the statement said.
The eligibility list include the NBFCs registered with RBI excluding Micro Finance Institutions and Core Investment Companies, HFCs registered with National Housing Bank (NHB).
Source : ians