Centre clears changes to Partial Credit Guarantee Scheme for NBFCs

Partial Credit Guarantee Scheme

The Union Cabinet has cleared the changes to the partial credit guarantee scheme for non-banking financial firms and housing finance companies.

During Union Budget this year, centre had announced the partial credit guarantee scheme. This was announced to offer one time six months’ partial credit guarantee to public sector banks for first loss up to 10 percent on the purchase of high rated pooled assets of non-bank lenders. The guarantee was offered for Rs 1 lakh crore during the financial year.

The scheme would be covering Non-Bank Finance Corporations (NBFCs) and Housing Finance Companies (HFCs) that may have dropped into SMA-0 category during the one year period prior to 1.8.2018, and asset pools rated “BBB+” or higher said the government in a release.

“The proposed government guarantee support and resultant pool buyouts will help address NBFCs/HFCs resolve their temporary liquidity or cash flow mismatch issues, and enable them to continue contributing to credit creation and providing last mile lending to borrowers, thereby spurring economic growth,” it added.

Expressing his views Rohit Poddar, Joint Secretary, NAREDCO Maharashtra and Managing Director, Poddar Housing and Development Ltd said, “It is a welcome move by the Ministry of Finance to spur growth in the stagnant markets across the sectors. The dearth of monetary inflow was the major inhibitor for the real estate sector. The proposed ‘Partial Credit Guarantee Scheme’ coupled with 135 bps rate cut by RBI will play as a catalyst to mobilize the cash flow in the NBFCs and shadow banking system. It will further enable Housing Finance Companies in credit creation to resolve the tight liquidity condition that the real estate sector has been facing at large.”

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