1 min read.Updated: 01 Jul 2020, 03:38 PM IST Edited By J. Jagannath
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
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
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.