Active Stocks
Fri Apr 19 2024 15:56:00
  1. Tata Steel share price
  2. 162.10 1.31%
  1. Tata Motors share price
  2. 963.20 -0.84%
  1. NTPC share price
  2. 350.90 -0.14%
  1. ITC share price
  2. 424.80 1.40%
  1. Power Grid Corporation Of India share price
  2. 281.70 0.54%
Business News/ Industry / Banking/  RBI announces special liquidity scheme for NBFCs and HFCs through SPV
BackBack

RBI announces special liquidity scheme for NBFCs and HFCs through SPV

To be eligible for the scheme the net non-performing assets should not be more than 6% as on March 2019
  • SPV would cease to make fresh purchases after September 30, 2020
  • The NBFCs and HFCs should be rated investment grade by a SEBI registered rating agency (Reuters)Premium
    The NBFCs and HFCs should be rated investment grade by a SEBI registered rating agency (Reuters)

    Reserve Bank of India on Wednesday said 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. To be eligible under the scheme, RBI laid out the conditions:

    a) The Non-Banking Financial Company (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.

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

    Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

    Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
    More Less
    Published: 01 Jul 2020, 03:38 PM IST
    Next Story footLogo
    Recommended For You
    Banking Stocks
    ₹1,024.150.52%
    ₹1,494.62.46%
    ₹1,055.451.04%
    ₹129.55-1%
    ₹744.80.81%
    Switch to the Mint app for fast and personalized news - Get App