Govt in process of approving Rs 20,000-crore lifeline to fund-starved NBFCs

Finance Secretary Rajiv Kumar on Monday said that the government is in the process of sanctioning Rs 20,000 crore to the fund-starved NBFCs under the partial credit guarantee scheme announced in the budget.

"We have supporting sanctions of over Rs 20,000 crore and the guarantee is being extended," Kumar told reporters on the sidelines of the 101st foundation day of state-run Union Bank of India here. He said some of the formalities are being worked now post which the scheme will get rolling.

Kumar said banks have been buying pooled assets since August last year after defaults by IL&FS began. He said since the past five years, the government has been cleaning up the balancesheets of all financial sector players, such as public and private sector banks, all India financial institutions, NBFCs, cooperative banks, auditors and rating agencies. "There is no way that the system can be gamed now," he warned.

The budget had proposed a partial credit guarantee scheme worth Rs 1 trillion under which public sector banks would buy high-rated pooled assets of financially sound NBFCs, including housing finance companies, amounting to Rs 1 trillion this year under which government will provide a one-time six months partial credit guarantee to public sector banks for first loss of up to 10 percent". The measure was announced to help ease the tight liquidity condition that shadow banks have been facing since the fall of segment major IL&FS in September 2018.

(With inputs from PTI)