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The government on Wednesday launched a life preserver to the stressed shadow Indian banking sector with an announcement of a Rs 45 billion liquidity infusion through a Partial Credit Guarantee Scheme (PCGS) 2.0 for non-bank financial companies ( NBFC)
Union Finance Minister Nirmala Sitharaman made the announcement as part of the government package to boost the economy that has slowed due to the Covid-19 pandemic.
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The scheme is designed to boost NBFCs, HFCs and MFIs with low credit ratings that require liquidity for fresh loans to MSMEs and individuals.
The existing PCGS scheme will be extended to cover loans such as the primary issuance of bonds / CP of said entities.
According to the scheme, the first 20% of the loss will be borne by the government, which will be the guarantor.
The scheme is expected to result in liquidity of Rs 45,000 cr.
In recent years, NBFCs have been struggling with bad assets and corporate governance problems.
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One of the most high-profile cases was infrastructure and financial services leasing, whose operations the government took over last year that defaulted on payments in 2018.
Dewan Housing Finance Limited or DHFL was another high-profile company that had defaulted on interest payments last year and is now under a money laundering investigation.
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