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Government issues guidelines for ₹1 trillion partial credit guarantee for NBFCs

1 min read . Updated: 13 Aug 2019, 09:41 PM IST Gireesh Chandra Prasad

NBFCs, including housing finance companies have been under stress following the series of defaults (Mint ) — NBFCs, including housing finance companies have been under stress following the series of defaults **(Mint )**

NBFCs, including housing finance companies have been under stress following the series of defaults
The guidelines said that the pool of assets should have minimum rating of 'AA' or equivalent at fair value prior to the partial credit guarantee by the government of India

The finance ministry has issued guidelines for rolling out its budget announcement of offering ₹1trillion partial credit guarantee to public-sector banks purchasing high-rated pooled assets of financially sound non-bank lenders.

Non banking finance companies (NBFCs), including housing finance companies have been under stress following the series of defaults by group companies of Infrastructure Leasing & Financial Services Ltd. (IL&FS) last year. Finance minister Nirmala Sitharaman announced the scheme in her FY19-20 budget to ensure that financially sound NBFCs continue to get bank funding.

"For purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of ₹1 lakh crore during the current financial year, the government will provide one-time six months' partial credit guarantee to public sector banks for first loss of up to 10%t," she had said.

The guidelines said that the pool of assets should have minimum rating of 'AA' or equivalent at fair value prior to the partial credit guarantee by the government of India.

The guidelines also said that the NBFCs registered with RBI and housing finance companies registered with National Housing Bank can take benefit under the window. (ends)