The government on Wednesday launched a Rs 30,000-crore scheme under which non-bank lenders will be provided short-term liquidity through a special purpose vehicle (SPV) set up by SBICAP, a subsidiary of the State Bank of India.
In March this year, Finance and Corporate Affairs Nirmala Sitharaman had announced the special scheme with a view to improve the liquidity position of non-banking financial companies (NBFCs) as well as housing finance companies (HFCs).
In a notification on Wednesday, the Reserve Bank of India (RBI) said the SPV will purchase the short-term papers from eligible NBFCs/HFCs, which shall utilise the proceeds under this scheme solely for the purpose of extinguishing existing liabilities.
The central bank also laid down the conditions which the NBFCs and HFCs will have to meet to become eligible to avail the scheme.
The RBI will provide funds for the special liquidity scheme by subscribing to government guaranteed special securities issued by the SLS Trust set up by SBI Capital Markets Limited (SBICAP), said a finance ministry release.
"The total amount of such securities issued outstanding shall not exceed Rs 30,000 crore at any point of time," it said.
The government will provide an unconditional and irrevocable guarantee to the special securities issued by the Trust.
"The scheme is being launched on July 1, 2020 through a SPV in the form of SLS Trust set up by SBICAP," the ministry said.
The instruments will be commercial papers (CPs) and non-convertible debentures (NCDs) with a residual maturity of not more than three months and rated as investment grade, the RBI said.
"The facility, however, will not be available for any paper issued after September 30, 2020 and the SPV would cease to make fresh purchases after September 30, 2020 and would recover all dues by December 31, 2020," the RBI added.
NBFCs -- including microfinance institutions, excluding those registered as core investment companies -- and housing finance companies that are registered under the National Housing Bank Act can avail the special liquidity scheme.
However, their net non-performing assets should not be more than 6 per cent as on March 31, 2019 and they should have made net profit in at least one of the last two preceding financial years (2017-18 and 2018-19).
There are other conditions, like the entities should be rated investment grade by a SEBI registered rating agency, it said.
The scheme will remain open for three months for making subscriptions by the Trust.
The period of lending (CPs/NCDs of NBFCs/HFCs for short duration) by the Trust would be for a period of up to 90 days.
Further, those market participants who are looking to exit their standard investments with a residual maturity of 90 days may also approach the SLS Trust.
In a separate notification, the RBI said it has been decided to permit the banks to reckon the funds infused by the promoters in their MSME units through loans availed under the 'Subordinate Debt for Stressed MSMEs' scheme as equity/quasi equity from the promoters for debt-equity computation.
The credit facilities extended under the 'Subordinate Debt for Stressed MSMEs' scheme are backed by a guarantee from the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
As part of the Aatmanirbhar Bharat initiative, a provision of Rs 20,000 crore subordinate debt for two lakh MSMEs which are NPA or are stressed was announced in May.
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