Will provide funding to nonbanking cos via SPV: Economic affairs secretary Tarun Bajaj – The Economic Times

Summary This SPV will be the main vehicle for providing support to NBFCs as part of the economic package announced Tuesday and will carry out primary and secondary market operations toward this end, he said. This means it will subscribe to debt issued by NBFCs and also buy it from the secondary market to provide liquidity, which will make such paper more attractive to other investors.

“Government is taking all the risk upon itself,” said Bajaj, who moved from the Prime Minister’s Office to take charge as economic affairs as secretary a few days ago.
NEW DELHI: A special purpose vehicle will be set up to provide liquidity support to non-banking finance companies (NBFCs), economic affairs secretary Tarun Bajaj told ET.

“An SPV would be created and liquidity pushed in… government of India will stand guarantee,” Bajaj said.

This SPV will be the main vehicle for providing support to NBFCs as part of the economic package announced Tuesday and will carry out primary and secondary market operations toward this end, he said.

This means it will subscribe to debt issued by NBFCs and also buy it from the secondary market to provide liquidity, which will make such paper more attractive to other investors.

The SPV vehicle will invest in investment-grade debt of non-bank lenders, housing finance companies and microfinance institutions.

The government will stand 100% guarantee under the ₹30,000 crore window that was unveiled by finance minister Nirmala Sitharaman as the first part of the economic package.

“Government is taking all the risk upon itself,” said Bajaj, who moved from the Prime Minister’s Office to take charge as economic affairs as secretary a few days ago.

The package of Rs 3 lakh crore collateral-free loans for micro, small and medium enterprises (MSMEs) will also entail 100% government guarantees to ensure flow of liquidity to the sector, he said. To provide relief to businesses, additional working capital finance of 20% of outstanding credit on February 29 will be provided in the form of term loans at a concessional rate of interest.

This credit line will be available to MSMEs with up to Rs 25 crore outstanding and turnover of up to Rs 100 crore. Bajaj said this package is aimed at getting people back to work. “This package supports NBFCs, businesses including MSMEs, MFI, MFs….Basically to help people get back to work,” he said, adding that relief has been provided to businesses on employee provident fund front as well as to companies in real estate.

via Will provide funding to nonbanking cos via SPV: Economic affairs secretary Tarun Bajaj – The Economic Times

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