HYDERABAD: As part of the Rs 20 lakh crore economic package, Union Finance Minister Nirmala Sitharaman on Wednesday announced a booster shot for non-banking financial companies (NBFC), housing finance companies (HFC) and microfinance institutions (MFI).
The decisions include a Rs 30,000 crore Special Liquidity Scheme, which will help the needy NBFCs, HFCs and MFIs with capital, in case they fail to raise money through the traditional debt market routes. Besides, the Centre also announced another Rs 45,000 crore Partial Credit Guarantee Scheme 2.0 for NBFCs, hoping they will in turn lend it to MSMEs and retail borrowers.
While the proposed Rs 30,000 crore liquidity support will enhance investments in primary and secondary market transactions in investment-grade debt papers of NBFCs, HFCs and MFIs and increase liquidity, the Rs 45,000 crore Partial Credit Guarantee Scheme will help companies with low credit rating, including that of AA and below, given the sovereign backing for the first 20 per cent of the loss.
According to Harsh Shrivastava, CEO, MFIN, the twin measures will not only help in providing liquidity support but also increase the confidence among the lenders to the 5.8 crore microfinance borrowers, and spur onward lending all the country. “These measures are historic and will help restart the rural economy as the microfinance borrowers rebuild their businesses. We appreciate the government’s recognition of the industry’s need for a partial credit guarantee and enhanced liquidity support,” he added.
Similarly, Prabhat Chaturvedi, CEO, Netafim Agricultural Financing Agency, believes that as far as NBFCs are concerned, “the special liquidity scheme, where the government will buy investment-grade debt papers of NBFCs, will be helpful for those NBFCs providing moratorium to borrowers but were unable to avail the same benefit from lenders”. Experts, however, say a lot depends on banks if they would play ball given that a textbook definition of what constitutes investment-grade debt paper varies from bank to bank.