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- Government has operationalised a partial guarantee scheme announced in the budget for non-banking and housing finance companies(NBFCs and HFCs).
- The scheme provides for a one-time partial credit guarantee to Public sector banks(PSBs) for purchase of pooled assets of financially sound NBFCs.
- The scheme aims to address temporary asset liability mismatches of otherwise solvent NBFCs/HFCs without having to resort to distress sale of their assets to meet their commitments.
- The validity of the scheme offered will be open from the date of issuance of the Scheme by the Government for a period of six months or till such date by which Rupees One lakh crore assets get purchased by banks,whichever is earlier.
- The scheme was launched as the NBFCs including HFCs have been under stress following the series of defaults by group companies of Infrastructure Leasing & Financial Services Ltd. (IL&FS).
- This stress on NBFCs was seen as a key reason for a slowdown in the economy.It has also caused reduced credit flow to small businesses and consumers.
- However,this step is expected to provide liquidity to NBFCs and enable them to continue to play their role in meeting the financing requirements of productive sectors of economy.
