Friday, Jun 05, 2020 | Last Update : 01:03 AM IST

72nd Day Of Lockdown

Maharashtra77793336812710 Tamil Nadu2725614901223 Delhi236459542615 Gujarat18609126671155 Rajasthan98577104213 Uttar Pradesh92375439245 Madhya Pradesh85882772371 West Bengal68762768355 Bihar4420212028 Karnataka4320161057 Andhra Pradesh4112252971 Haryana3281112324 Telangana31471587105 Jammu and Kashmir3142104835 Odisha247814819 Punjab2415204347 Assam19894434 Kerala158969015 Uttarakhand115328610 Jharkhand7642975 Chhatisgarh6781892 Tripura6221730 Himachal Pradesh3691636 Chandigarh3022225 Goa126570 Manipur124110 Puducherry90330 Nagaland8000 Arunachal Pradesh3710 Meghalaya33131 Mizoram1710 Sikkim200

Budget 2019: Govt to provide credit guarantee to PSBs to buy NBFC assets

PTI
Published : Jul 5, 2019, 3:06 pm IST
Updated : Jul 5, 2019, 3:06 pm IST

The NBFC sector is currently undergoing a liquidity hurdle with a spate of defaults of companies.

Govt will provide a one-time partial credit guarantee to PSBs to buy high-rated pooled assets of financially sound NBFCs.
 Govt will provide a one-time partial credit guarantee to PSBs to buy high-rated pooled assets of financially sound NBFCs.

New Delhi: Non-banking financial companies (NBFCs) play an important role in capital formation and the government will provide a one-time partial credit guarantee to PSBs to buy high-rated pooled assets of financially sound NBFCs, Finance Minister Nirmala Sitharaman said in the Union Budget 2019-20 on Friday.

NBFCs are playing an important role in sustaining consumption demand as well as capital formation in small and medium industrial segment, she said in her maiden Budget Speech in Parliament.

 "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 months' partial credit guarantee to public sector banks (PSBs) for first loss of up to 10 per cent," Sitharaman said.

Also, even as NBFCs are regulated by the RBI, it has limited authority over the sector, therefore appropriate proposals for strengthening the regulatory authority of RBI over NBFCs are being placed in the Finance Bill, the minister said.

However, she said NBFCs that are fundamentally sound should continue to get funding from banks and mutual funds without being unduly risk averse.

The NBFC sector is currently undergoing a liquidity hurdle with a spate of defaults of companies such as IL&FS along with its group companies and DHFL that started unfolding since September 2018.

Among others, Sitharaman said the government will allow NBFCs to raise funds in public issues, and the requirement of creating a debenture redemption reserve (DRR), which is currently applicable for only public issues as private placements are exempt, will be done away with.

As of now, NBFCs that do public placement of debt have to maintain a DRR and in addition, a special reserve as required by the RBI, has also to be maintained.

"To bring more participants, especially NBFCs, not registered as NBFCs-Factor, on the TReDS platform, amendment in the Factoring Regulation Act, 2011 is necessary and steps will be taken to allow all NBFCs to directly participate on the TReDS platform," she said.

Sitharaman also said efficient and conducive regulation of the housing sector is important in India's context. Currently, the National Housing Bank (NHB), besides being the refinancer and lender, is also regulator of the housing finance sector.

"This gives a somewhat conflicting and difficult mandate to NHB. I am proposing to return the regulation authority over the housing finance sector from NHB to RBI. Necessary proposals have been placed in the Finance Bill," the minister said.

Tags: union budget 2019, budget 2019, budget parliament, nirmala sitharaman, finance budget, economic survey 2019, banking sector, nbfc, rbi, psb
Location: India, Delhi, New Delhi
ADVERTISEMENT
ADVERTISEMENT