Liquidity scheme for NBFCs, HFCs by RBI | Arriba Trends

Liquidity scheme for NBFCs, HFCs by RBI


In view to improve the liquidity position and to avoid any possible systematic risks to the financial sector, the Reserve bank of India on wednesday informed that the government has approved a scheme for NBFCs (non-banking finance companies) and HFCs (housing finance companies) through a SPV(special purpose vehicle).

The SPV setup by the SBI Caps will be managing the operations, as directed by the government. As per RBI statement “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 investment grade rated, having residual maturity of not more than three months, CPs and NCDs will be the instruments. Further RBI added, “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”.

To be eligible under the scheme, RBI has laid out eight conditions which are:

  • 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.
  • Housing Finance Companies that are registered under the National Housing Bank Act, 1987.
  • CRAR/CAR of NBFCs/HFCs should not be below the regulatory minimum, that is, 15 % and 12 % respectively as on March 31, 2019.
  • The net non-performing assets should not be more than 6 per cent as on March 31, 2019.
  • They should have made net profit in at least one of the last two preceding financial years (that is, 2017-18 and 2018-19).
  • 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 1, 2018.
  • They should be rated investment grade by a SEBI registered rating agency.
  • 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.
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