The special liquidity scheme worth Rs 30,000 crore for stressed non-banking financial companies (NBFCs) and housing finance companies (HFCs), whose financials further deteriorated because of the Covid-19 crisis, could be a non-starter as the three-month loan tenure is a huge disappointment.

The partial credit guarantee scheme approved by the cabinet had a tenure of one year, which the industry said would not attract any takers.

“This facility would supplement the liquidity measures taken so far by the government and the RBI. The scheme would benefit the real economy by augmenting the lending resources of NBFCs/HFCs/MFls,” a release after the cabinet meeting had said.

This is a post-facto approval from the cabinet as the scheme was announced as part of the first tranche of the Rs 20-lakh- crore comprehensive economic package.

Under the scheme, the funds offered are only for a three-month tenure. The industry was expecting liquidity support for at least three years.

“We are completely disappointed. With a three-month repayment period, this scheme is a non-starter. No NBFC will be able to repay money back in that short period,” Raman Agarwal, co-chairman of the Finance Industry Development Council (FIDC), a representative body of NBFCs, told The Telegraph.

He said “even the partial credit guarantee scheme would also not attract takers as the loan tenure is too short.

Both the schemes should have been for at least three years in tune with the loan tenure”.

The government release had said:

“A large public sector bank would set up an SPV to manage a stressed asset fund which would issue interest bearing special securities guaranteed by the government, to be purchased by the RBI only.

“The SPV would issue securities, subject to the total amount of securities outstanding not exceeding Rs 30,000 crore to be extended by the amount required. The securities issued by the SPV would be purchased by RBI and proceeds thereof would be used by the SPV to acquire the debt of at least investment grade of short duration.”