Special Liquidity Scheme for NBFCs/HFCs | UPSC

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Special Liquidity Scheme for NBFCs_HFCs UPSC

Special Liquidity Scheme for NBFCs/HFCs | UPSC


The Government of India has approved a scheme to improve the liquidity position of NBFCs/HFCs through a Special Purpose Vehicle (SPV) to avoid any potential systemic risks to the financial sector.

      WHY IN NEWS:

Press Release RBI !

MINISTRY? :- Ministry of Finance


For PRELIMS press releases from RBI are equally important for Prelims and Main . That is the reason we had to include this !

For MAINS look out for beneficiaries and non-compliance issues . You will have a brief idea about systematic investment models .



Special Purpose Vehicle (SPV) is  to avoid any potential systemic risks to the financial sector.

  The SPV will purchase the short term papers from eligible NBFCs/HFCs, who shall utilise the proceeds under this scheme solely for the purpose of extinguishing existing liabilities.


SBICAP which is a subsidiary of the State Bank of India has set up a SPV (SLS Trust) to manage this operation.


a) NBFCs including Microfinance Institutions that are registered with the RBI under the Reserve Bank of India Act, 1934, excluding those registered as Core Investment Companies;

b) Housing Finance Companies that are registered under the National Housing Bank Act, 1987;

c) CRAR/CAR of NBFCs/HFCs should not be below the regulatory minimum, i.e., 15% and 12% respectively as on March 31, 2019;

d) The net non-performing assets should not be more than 6% as on March 31, 2019;

e) They should have made net profit in at least one of the last two preceding financial years (i.e. 2017-18 and 2018-19);

f) They should not have been reported under SMA-1 or SMA-2 category by any bank for their borrowings during last one year prior to August 01, 2018;

g) They should be rated investment grade by a SEBI registered rating agency;

h) They should comply with the requirement of the SPV for an appropriate level of collateral from the entity, which, however, would be optional and to be decided by the SPV.

The instruments will be CPs and NCDs with a residual maturity of not more than three months and rated as investment grade.

      IASbhai WINDUP: 

The facility 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; or as may be modified subsequently under the scheme.

     SOURCES:THE HINDU & PIB | Special Liquidity Scheme for NBFCs/HFCs | UPSC



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