The Modi government approved a special liquidity scheme through a Special Purpose Vehicle (SPV), to provide financial support to the NBFCs and HFCs.
In an effort to provide financial support to the non-banking finance companies and housing finance companies, the Modi government approved a special liquidity scheme through a Special Purpose Vehicle (SPV). The Reserve Bank of India said that SBICAP – a subsidiary of the State Bank of India – has set up an SPV to manage this operation and aims to cut the ongoing risks to the financial sector. The SPV will purchase the short-term papers from eligible NBFCs or HFCs, who can utilise the funds under this scheme solely for the purpose of getting rid of existing liabilities.
The RBI added that commercial papers (CPs) and non-convertible debentures (NCDs) will be used as the instruments with a residual maturity of not more than three months and rated as investment grade. The facility under this scheme will be allowed until September 30, 2020, and thereafter, no fresh purchases from NBFCs and HFCs will be made. The statement also mentioned that all the dues will be recovered by December 31, 2020, or at the modified period under the scheme.
Source: Financial Express
