Finance Minister Nirmala Sitharaman on Wednesday (May 13) announced a ₹30,000 crore special liquidity scheme for non-banking financial institutions to provide credit support to the sector amid the COVID-19 crisis.
Further, a ₹45,000 crore partial credit guarantee scheme 2.0 was also unveiled for non-banking financial companies (NBFCs), housing finance companies (HFCs), and microfinance institutions (MFIs) with low credit rating to help them extend loans to individuals and MSMEs.
Under the ₹30,000 crore special liquidity scheme, the minister said investments will be made in both primary and secondary market transactions in investment-grade debt papers of these institutions.
These securities will be fully guaranteed by the government. She said this will provide liquidity support to these institutions and mutual funds and create confidence in the market.
These institutions are finding it difficult to raise money from the debt markets, Sitharaman added.
Talking about the partial credit guarantee scheme 2.0 (PCGS), she said NBFCs, HFCs, and MFIs with low credit rating require liquidity for fresh lending to MSMEs and individuals. The existing PCGS will be extended to cover borrowings such as primary issuance of bonds/commercial papers (liability side of balance sheet) of such entities.
The first 20% of loss will be borne by the guarantor, that is the government. She said AA-rated papers and below, including unrated papers, will be eligible for investment (especially relevant for many MFIs).
These measures are part of the ₹20 lakh crore package announced by Prime Minister Narendra Modi on Tuesday (May 12).