The Reserve Bank of India (RBI) on Wednesday said the government has approved a scheme for non-banking finance companies (NBFCs) and housing finance companies (HFCs) to improve their liquidity position and avoid any potential systemic risks to the financial sector through a special purpose vehicle (SPV).
As per the government decision, SBI Caps which is a subsidiary of the State Bank of India has set up an SPV (SLS Trust) to manage this operation. “The SPV will purchase the short-term papers from eligible NBFCs and HFCs, which will utilise the proceeds under this scheme solely for the purpose of extinguishing existing liabilities,” the RBI said.
According to the RBI, the instruments will be CPs and NCDs with a residual maturity of not more than three months and rated as investment grade.
“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,” it said.
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