Cabinet approves Special Liquidity Scheme for NBFCs/HFCs to address their liquidity stress

The Union Cabinet, which met here on Wednesday under the chairmanship of Prime Minister Narendra Modi, gave approval to the Finance Ministry to launch a new Special Liquidity Scheme for non-banking financial companies (NBFCs) and housing finance companies (HFCs) to improve their liquidity position.

The Union Cabinet, which met here on Wednesday under the chairmanship of Prime Minister Narendra Modi, gave approval to the Finance Ministry to launch a new Special Liquidity Scheme for non-banking financial compes (NBFCs) and housing finance compes (HFCs) to improve their liquidity position.

A Special Purpose Vehicle (SPV) would be set up to manage a Stressed Asset Fund (SAF), whose special securities would be guaranteed by the Government of India and purchased by the Reserve Bank of India (RBI) only.

The proceeds of the sale of such securities would be used by the SPV to acquire short-term debt of NBFCs/HFCs. The Scheme will be administered by the Department of Financial Services, which will issue the detailed guidelines, as per an official statement.

It had been announced in the Union Budget of 2020-21 that a mechsm would be devised to provide additional liquidity facility to NBFCs/HFCs over that provided through the Partial Credit Guarantee Scheme (PCGS).

( With inputs from ANI )