Banks are set to extend funds to lower rated non-banking financial companies and housing finance companies following the government’s decision to offer credit guarantee support.
Banks which were pressing for a guarantee from the government to lend money to NBFCs despite the Reserve Bank of India opening a liquidity window for NBFCs and microfinance firms have welcomed the government guarantee announced in the stimulus package. “The envisaged support of full credit guarantees to the lower rated NBFC and HFC entities will restore stability in financial markets and could act as a clear enabling factor for compressing credit spreads,” SBI Chairman Rajnish Kumar said.
“The measures for MSME through guarantees, equity infusion and debt support will incentivize bank lending to MSMEs as well as providing crucial support to stressed entities in the current situation,” Kumar said.
Manoj Kumar Nambiar, MD Arohan and Chairman of MFIN, said, “The first measure with full guarantee for Rs 30,000 crore and the second one for Rs 45,000 crore with 20 per cent partial guarantee for NBFCs, HFCs and MFIs is path breaking from the government of India.” Deo Shankar Tripathi, MD & CEO, Aadhar Housing Finance, said, “the special liquidity of Rs 30,000 crore with government guarantee will encourage banks to subscribe investment grade debt papers of AA and below rated NBFCs, HFCs and MFIs.”
“Now banks with government guarantee will happily draw funds from the RBI and support low rated companies. Another Rs 45,000 crore with 20 per cent first loss partial guarantee from government will encourage lenders to support low and even unrated NBFCs, MFIs and HFCs. This measure will largely solve the liquidity issues of these lenders,” he said.
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