“An SPV would be created and liquidity pushed in … The Government of India will guarantee,” Bajaj said.
This SPV will be the main tool to provide support to NBFCs as part of the economic package announced Tuesday, and will conduct primary and secondary market operations for that purpose, he said.
This means that it will subscribe for 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 debt quality from non-bank providers, home finance companies and microfinance institutions.
The government will provide 100% guarantee under the £ 30,000 crore window revealed by the finance minister Nirmala Sitharaman as the first part of the economic package.
“The government is taking all that risk on itself,” said Bajaj, who moved from the prime minister’s office to take on financial affairs as secretary a few days ago.
The package of Rs 3 lakh crore security-free loans for micro, small and medium enterprises (MSMEs) will also include 100% public guarantees to ensure flow of liquidity to the sector, he said. To provide relief to businesses, additional working capital financing of 20% of the outstanding credit is granted on February 29 in the form of short-term loans at a concessional rate.
This credit limit will be available to MSMEs with up to Rs 25 crore outstanding and a turnover of up to Rs 100 crore. Bajaj said this package aims to get people back to work. “This package supports NBFCs, companies including MSMEs, MFIs, MFs …. Fundamentals of helping people get back to work,” he said, adding that relief has been provided to businesses on the employee confidentiality fund as well as to real business be.
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