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FM Sitharaman: 15 proposals of stressed NBFCs, HFCs worth Rs 6,399 crore sanctioned

Finance Minister Nirmala Sitharaman said 37 more applications seeking financing of up to Rs 11,037 crore are under process.

By: ENS Economic Bureau | New Delhi | August 9, 2020 12:25:37 am
Finance Minister Nirmala Sitharaman (PTI)

The government said on Saturday that 15 proposals worth Rs 6,399 crore of stressed non-banking financial companies (NBFCs) and housing finance companies (HFCs) have been sanctioned under the special liquidity window opened to support firms facing distress. “The Special Liquidity Scheme (SLS) of Rs 30,000 crore was announced as a part of the #AatmanirbharBharat package with an aim to improve the liquidity position of NBFCs and HFCs,” Finance Minister Nirmala Sitharaman said in a tweet.

She said 37 more applications seeking financing of up to Rs 11,037 crore are under process. The scheme launched on July 1 permits both primary and secondary market purchases of debt and seeks to address the short term liquidity needs of NBFCs and HFCs. Any NBFC including microfinance institutions registered with RBI and any HFC registered with the National Housing Bank, are eligible to raise funding from this facility subject to certain conditions.

The Reserve Bank of India has provided funds for the scheme by subscribing to government-guaranteed special securities issued by a trust set up by SBI Capital Markets Ltd (SBICAP). The scheme is being implemented by SLS Trust, the SPV set up by SBICAP. The special liquidity scheme is open for three months for making subscriptions by the Trust.

Under the scheme, the government will provide an unconditional and irrevocable guarantee to the special securities issued by the Trust. The instruments will be commercial papers and non-convertible debentures with a residual maturity of not more than three months and rated as investment grade.

On Thursday, the RBI announced an additional special liquidity facility of Rs 10,000 crore at the policy repo rate — Rs 5,000 crore each to the NHB and NABARD. Liquidity injection has been a key tool used by the RBI and the government to provide relief to companies. Since February 2020, liquidity measures announced by the RBI aggregated to about Rs 9.57 lakh crore — equivalent to about 4.7 per cent of the 2019-20 nominal GDP.

The RBI Thursday said that the liquidity measures so far have helped in significant lowering of interest costs for corporate borrowers, resulting in effective transmission of lower policy rates and improvement in financial conditions. The situation for NBFCs and mutual funds has also stabilised since Covid-19 first jolted markets in March.

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