NBFCs Tap Special Liquidity Window For Financing
Reeling under tight liquidity conditions, NBFCs and HFCs begin relying on loan sell-downs to banks to raise funds. (Photographer: Dhiraj Singh/Bloomberg)

NBFCs Tap Special Liquidity Window For Financing

An entity set up to provide support to non-bank lenders has received applications for a third of the allocated Rs 30,000 crore within a week of starting operations as shadow banks tapped the special liquidity window.

SBI Capital Markets, tasked to create a special purpose vehicle for the liquidity window for NBFCs, has received 24 applications for financing about Rs 9,875 crore as on July 7, 2020, the Ministry of Finance said in a statement. The first application has received approval and others are under process.

To provide liquidity support to non-bank, housing finance and microfinance lenders, the government announced the Rs 30,000-crore fully guaranteed support under the Aatmanirbhar Bharat package. The scheme was notified on July 1.

Besides this, public sector banks have approved purchase of NBFCs loans worth Rs 14,000 crore under the Rs 45,000-crore Partial Credit Guarantee Scheme, a statement said after Finance Minister Nirmala Sitharaman reviewed the announcements. Banks are in talks for buying additional Rs 6,000 crore worth of portfolio as on July 3, it said.

Sitharaman had announced a revamp of the Partial Credit Guarantee Scheme to cover lower-rated borrowings of NBFCs under which the government would provide 20% first loss sovereign guarantee to state-owned banks.

Status Of Relief Measures

The government said the scheme to provide working capital to farmers disbursed Rs 24,877 crore out of the total allocation of Rs 30,000 crore. This special refinance facility was sanctioned by NABARD.

Micro, small and medium enterprises have been disbursed loans worth Rs 61,988 crore under the 100% Emergency Credit Line Guarantee Scheme as on July 9, the statement said. Of this, public sector banks have disbursed Rs 38,373 crore, while rest came from private lenders.

As on July 9, both public and private banks have sanctioned Rs 1.20 lakh crore worth loans to small businesses. The scheme that provides 100% guarantee to banks on such loans can be availed until Oct. 31

To provide relief to MSMEs, the Ministry of Corporate Affairs is also working on a special insolvency resolution under Section 240A of the Insolvency and Bankruptcy Code, the statement said. The section gives powers to the government to exclude small businesses from some provisions of the law.

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