With a view to provide additional liquidity to crisis-ridden NBFCs and housing finance companies (HFCs), the government on Monday relaxed norms for Partial Credit Guarantee Scheme (PCGS) for purchase of bonds and commercial papers by public sector banks and extended its period by three months.
Keeping in view the progress under the Scheme and the fact that the stipulated limit for AA/AA- rated bonds/CPs (commercial papers) has been nearly reached, while the appetite for lower rated papers is nearing saturation considering their lower ticket size, the government has now decided to modify PCGS 2.0.
"Additional 3 months have been granted to build up the portfolio. At the end of six months, i.e. by November 19, 2020, the portfolio shall be crystallised based on actual amount disbursed, for the Guarantee to come into effect," a finance ministry statement said.
At the portfolio level, AA and AA- investment sub-portfolio under the Scheme should not exceed 50 per cent of the total portfolio of bonds/CPs purchased by public sector banks (PSBs) under the Scheme as against 25 per cent stipulated earlier.
"It is expected that the above modification will provide greater flexibility to PSBs in purchasing bonds/CPs under PCGS 2.0," it said.
As part of Rs 20.97 lakh crore 'Aatmanirbhar Bharat Abhiyan', announced by the government, PCGS 2.0 was launched on May 20 to provide portfolio guarantee for purchase of papers with a rating of AA and below, issued by NBFCs/HFCs/micro finance institutions (MFIs), by PSBs.
It was envisaged to purchase bonds or CPs of Rs 45,000 crore under PCGS 2.0 of which the maximum headroom permissible for purchase of papers rated AA/AA- was 25 per cent of the total portfolio i.e. Rs 11,250 crore, the statement said.
In addition, the government had separately announced the Special Liquidity Scheme (SLS) for purchase of CPs and non-convertible debentures (NCDs) issued by NBFCs/HFCs with a residual maturity of up to 3 months, which could be extended for a further period of upto 3 months, of a total value not exceeding Rs 30,000 crore to be extended by the amount required as per need.
Under PCGS 2.0, PSBs have approved purchase of bonds/CPs rated AA/AA- issued by 28 entities and bonds/CPs rated below AA- issued by 62 entities, amounting to Rs 21,262 crore overall.
The average ticket size of bonds/CPs rated below AA- is significantly lower than the average ticket size of bonds/CPs rated AA/AA-.
Under SLS, proposals of Rs 7,464 crore have been approved for purchase so far, it said.
Any NBFC, including MFIs registered with RBI under the RBI Act, 1934 (excluding those registered as Core Investment Companies) and any HFC registered with the National Housing Bank under the National Housing Bank Act, 1987 which is complying with certain specified conditions, is eligible to raise funding from this facility.
Earlier this month, the government widened the scope of the Rs 3-lakh crore MSME credit guarantee scheme by doubling the upper ceiling of loans outstanding to Rs 50 crore and including certain individual loans given to professionals like doctors, lawyers and chartered accountants for business purposes under its ambit.
Briefing the media about the changes made, Finance Minister Nirmala Sitharaman had said the scheme will now include individual loans given for business purposes within the ambit of the Emergency Credit Line Guarantee Scheme (ECLGS), subject to the eligibility criteria of the scheme.
To include more companies to take benefit of the scheme, the upper ceiling of loans outstanding as on February 29 for being eligible under the scheme was increased from Rs 25 crore to Rs 50 crore.
The maximum amount of guaranteed emergency credit line (GECL) funding under the scheme would also correspondingly increase from Rs 5 crore at present to Rs 10 crore, she said.
Announced as part of the government's economic package to tackle the impact of COVID-19, the scheme is now applicable for companies with an annual turnover of Rs 250 crore as against the earlier Rs 100 crore.
The finance minister had said that the intended changes are likely to expand the ambit of ECLGS to make an additional amount of more than Rs 1 lakh crore eligible under the scheme.
