Govt to provide credit guarantee to PSBs to buy NBFC assets

The government Friday said it will provide one time partial credit guarantee to public sector banks to buy rated pooled assets of financially sound NBFCs.

"For purchase of high rated pooled assets of financially sound NBFCs amounting to a total of Rs 1 lakh crore during the current financial year, government will provide one time six-month partial credit guarantee to PSBs for first lot of up to 10 per cent," Finance Minister Nirmala Sitharaman said in her maiden Union Budget 2019-20.

She said NBFCs are playing an important role in sustaining credit demand and maintaining capital formation in small and medium industrial segment.

Non-banking financial companies (NBFCs) that are fundamentally strong continue to get funding from banks and mutual funds without being unduly risk averse, Sitharaman said.

The minister also proposed to bring NBFCs under the regulation of the RBI for better oversight and to strength monitoring of the sector effectively.