Liquidity push for stressed NBFCs likely soon

NEW DELHI: THE Ministry of Finance has received financing requests of close to Rs  10,000 crore from Non-banking Financial Companies (NBFCs) under the special liquidity scheme and is considering a few more requests. The scheme was launched in July 1, It was announced by finance minister Nirmala Sitharaman under the Aatmnirbhar Bharat package in May. It was also immediately approved by the cabinet. The scheme was aimed to provide financial assistance to the NBFC and HFC sectors whose financials further deteriorated due to the Covid-19 crisis and to avoid any further risks.

The Reserve Bank of India (RBI) has provided funds for the scheme by subscribing to gover nment-guaranteed special securities issued by a trust set up by SBI Capital Markets Limited (SBICAP). “The RBI has also issued a circular to NBFCs and HFCs on July 1, 2020, itself on the Scheme. SBICAP has received 24 applications requesting about Rs  9,875 crore of financing as on July 7, 2020, which are being processed,” the finance ministry said in a statement.

“The first application has been approved and the remaining are also under consideration, Finance Ministry said. The information was given after the latest review of the Atmanirbhar Bharat package by Finance Minister Nirmala Sitharaman, in which the progress of various schemes announced by her were discussed. NBFCs and HFCs came under stress following a series of defaults by IL&FS g r o u p f i r ms in September 2018. While the government has initiated many measures since then to ease the stress in the sector, the recent coronavirus pandemic has increased the risk factor for the financial institutions in general and NBFCs and HFCs in particular.

Recently, RBI governor Shaktikanta Das had also warned of the risk posed by these two sectors because of the pandemic. Das also adviced NBFCs to undertake COVID stress tests to analyse the balance sheet impact in areas like liquidity, asset quality, profitability and capital adequacy for the years 2020-21 and 2021-22 and work out possible mitigating measures including capital raising.