With a view to improving the liquidity position of NBFCs as well as HFCs, the Union Minister for Finance & Corporate Affairs Smt Nirmala Sitharaman had announced on 13^th March 2020, launch of a Special Liquidity Scheme of ₹ 30,000 crore. RBI will provide funds for the Scheme by subscribing to government guaranteed special securities issued by the Trust. The total amount of such securities issued outstanding shall not exceed ₹ 30,000 crores at any point of time.  Government of India will provide an unconditional and irrevocable guarantee to the special securities issued by the Trust. The Scheme is being launched on July 1, 2020through a Special Purpose Vehicle in the form of SLS Trust set up by SBI Capital Markets Limited (SBICAP).

Any NBFC including Microfinance Institutions registered with RBI under the Reserve Bank of India Act, 1934 (excluding those registered as Core Investment Companies) and any HFC registered with the National Housing Bank (NHB) under the National Housing Bank Act, 1987which is complying with the following broad conditions will be eligible to raise funding from the said facility:

1. Compliance with RBI regulations on Capital adequacy
2. Net NPA is less than 6% as on 31.03.2019
3. Net profit in at least one of the two preceding financial years
4. Rated as investment grade by a rating agency
5. Is not reported under SMA-1 or SMA-2 category by any bank for their borrowing during the period one year prior to 01.08.2018

The Scheme will remain open for 3 months for making subscriptions by the Trust.The period of lending (CPs/NCDs of NBFCs/HFCs for short duration of upto 90 days) by the Trust shall be for a period of upto 90 days. The financing would be used by the NFBCs/HFCs only to repay existing liabilities and not to expand assets. Further, those market participants who are looking to exit their standard investments with a residual maturity of 90 days may also approach the SLS Trust.

This facility is a part of the Government of India and RBI’s efforts to alleviate the concerns of the market participants on the availability of fundsto the sector. Those wishing to avail liquidity under the Scheme can apply at [email protected]. Details of the Scheme can be viewed on the website of SBI Capital Markets.

A circular of RBI on the Special Liquidity Scheme for NBFCS/HFCs dated July 1, 2020 ia Annexed

Special Liquidity Scheme for NBFCs and HFCs provides government guaranteed short term funding to repay existing liabilities. Special Liquidity Scheme establishes a government guaranteed facility through an SLS Trust to provide short term funding by purchasing up to 90 day commercial paper and NCDs of eligible NBFCs and HFCs; eligibility requires registration with the appropriate regulator, compliance with capital adequacy, specified asset quality and profitability conditions, an investment grade rating, and absence of certain categorized slippages, and proceeds must be used only to repay existing liabilities.