NEW DELHI: The finance ministry on Wednesday said state-owned banks have approved purchase of bonds and commercial papers (CPs) worth ₹14,667 crore issued by 67 non-banking financial companies (NBFCs), under the Partial Credit Guarantee Scheme (PGCS).
“As of 10 July, 2020, under the extended PCGS, PSBs (public sector banks) have approved for purchase bonds/commercial papers issued by 67 NBFCs amounting to ₹14,667 crore, of which ₹6,845 crore is for bonds/CPs rated below AA, providing liquidity support to NBFCs with lower rated Bonds/CPs,” finance minister Nirmala Sitharaman’s office said in a tweet.
Purchase of bonds and commercial papers worth ₹6,125 crore, including ₹5,550 crore of debt instruments rated below AA, is currently under various stages of approval, it added.
The government had announced the scheme in July last year, which allowed public sector banks to purchase high-rated pooled assets from financially sound NBFCs and housing finance companies.
In May, Sitharaman extended it to cover primary market issuance of bonds by NBFCs, HFCs and micro finance institutions (MFIs) with low credit rating. This will not only provide liquidity support to institutions with low credit rating but also ensure continuity of credit support to micro, small and medium enterprises (MSMEs) that have been hit the hardest by the coronavirus pandemic.
The government will provide 20% first loss sovereign guarantee to public sector banks, resulting in total liquidity infusion worth ₹45,000 crore. The scheme covers papers with ratings of AA and below, including unrated papers, aimed at providing access fresh liquidity support to non-bank lenders.
“Sovereign portfolio guarantee of up to 20% of first loss for purchase of Bonds or Commercial Papers (CPs) with a rating of AA and below (including unrated paper with original/ initial maturity of up to one year) issued by NBFCs/ MFCs/Micro Finance Institutions (MFIs) by Public Sector Banks (PSBs) through an extension of the Partial Credit Guarantee Scheme (PCGS),” the government had said in a statement in May.