The Government of India has approved a Special Liquidity Scheme for NBFC and HFC to improve the liquidity position of NBFCs/HFCs through a Special Purpose Vehicle (SPV) to avoid any potential systemic risks to the financial sector.
To be eligible under the Scheme, the following conditions should be met:
A special purpose vehicle (SPV) has been set up to manage a stressed asset fund where the securities will be guaranteed by the government. The SPV would issue securities of up to Rs 30,000 crore and these would be purchased by RBI. The funds thus received from the sale of securities would be used by the SPV to buy short-term investment-grade papers from eligible NBFCs and HFCs, providing them with some liquidity. The instruments will be CPs and NCDs with a residual maturity of not more than three months and rated as investment grade. The facility will not be available for any paper issued after September 30, 2020 and the SPV would cease to make fresh purchases after September 30, 2020 and would recover all dues by December 31, 2020
SBICAP which is a subsidiary of the State Bank of India has set up a SPV (SLS Trust) to manage this operation.
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