PSU banks likely to disburse Rs 25,000 crore more to NBFCs
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PSU banks likely to disburse Rs 25,000 crore more to NBFCs

�The partial credit guarantee scheme is a morale booster for the NBFC sector,� said Sumit Bali, CEO, IIFL Finance.
13 Jan, 2020, 10:29 IST | Mumbai, India
PSU banks likely to disburse Rs 25,000 crore more to NBFCs

Mumbai: The government has likely set a target for disbursing at least Rs 25,000 crore under the Partial Credit Guarantee (PCG) scheme that seeks to ease the liquidity position of non-banking finance companies, three industry executives with direct knowledge of the matter said.

The PCG was proposed in the Union Budget 2019-20 and came into effect from August last year, although it elicited little response from banks and NBFCs due to a lack of clarity. SIDBI is the nodal agency for such deals.

Public sector banks, mandated for the PCG plan, disbursed Rs 10,000 crore in the December quarter, most of which took place in the last two weeks of the year, according to an industry estimate. This should bring the total disbursal figure to about Rs 35,000 crore by March-end.

Finance ministry officials didn?t respond to ET?s email till press time.

?The intensity of demand for liquidity is likely to rise as the quantum may double in March quarter,? said R Sridhar, CEO of IndoStar Capital. ?Public sector banks are leading the way and showing interest to do such deals after FinMin (finance ministry) relaxed norms in December.?

?PCG scheme has been extremely helpful to address the liquidity concerns faced by NBFCs who are standing on their own and building independent retail franchises,? Sridhar said.

IndoStar has raised Rs 610 crore under PCG over past one month. It is said to have sold SME and commercial vehicle loans to SBI and Bank of Baroda, said a market source.

Both the banks could not be contacted immediately for comment.

?We have got government approval to buy a Rs 497-crore loan pool for which an agreement will be signed soon,? said Pallav Mohapatra, CEO, Central Bank of India. ?Banks have identified pools based on their risk profile and credit ratings and those are at various stages of sanctioning.?

Last December, the government relaxed select norms, prompting public sector banks to buy a pool of assets from non-banking finance or housing finance companies. A sovereign guarantee backs such asset purchases limited to 10% of fair value of the pool.

The liquidity window is available until June 30 this year within which NBFCs can sell the assets pool worth Rs 1,00,000 crore to banks.

?Smaller NBFCs pleaded with the government citing their lower-rated loan assets, which likely moved the government to change rating grade of asset pools under PCG,? said the head of a midsize NBFC. The programme gained more traction after December when the government cut the benchmark rating grade by a notch to BBB+ from AA earlier.

?The partial credit guarantee scheme is a morale booster for the NBFC sector,? said Sumit Bali, CEO, IIFL Finance. ?In addition to partial credit guarantee, securitisation and co-origination models have helped the sector to continue the momentum of growth. We expect the government to announce further measures to boost demand.?