Government Notifies Partial Credit Guarantee Scheme For State-Run Banks

The government on Tuesday notified the scheme of partial credit guarantee for PSBs to buy pooled assets of NBFCs (non-banking financial company) up to Rs 1 lakh crore, activating the announcement of the Budget in July this year to boost lending to the cash strapped NBFCs.

"This would provide liquidity to the NBFC sector and, in turn, enable them to continue to play their role in meeting the financing requirements of the productive sectors of economy including MSME, retail and housing", the Finance Ministry said.

The government has issued the scheme to implement the announcement in the Budget Speech for 2019-20 to provide a one-time partial credit guarantee to public sector banks for purchase of pooled assets of the financially sound NBFCs, the notification said.

The Department of Financial Services (DFS) will monitor the scheme. Partial credit guarantee scheme to address temporary asset liability mismatch of solvent NBFCs/HFCs; they will not resort to distress sales for meeting commitments. Scheme to be open for 6 months or till banks exhaust 1 lakh crore asset purchase limit.

NBFCs/HFCs can sell maximum up to 20 per cent of standard assets with a cap of Rs 5,000 crore, the official notification said.