{"id":4031,"date":"2021-04-10T07:27:31","date_gmt":"2021-04-10T07:27:31","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=4031"},"modified":"2021-04-10T08:50:20","modified_gmt":"2021-04-10T08:50:20","slug":"special-liquidity-scheme-for-nbfcs-or-hfcs","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/special-liquidity-scheme-for-nbfcs-or-hfcs\/","title":{"rendered":"A Comprehensive Analysis on Special Liquidity Scheme for NBFCs or HFCs"},"content":{"rendered":"\n<p class=\"has-drop-cap\">To develop the liquidity position of NBFCs (Non-Banking Financial Company) or HFCs (Home Finance Company), the Union Minister for Finance and Corporate Affairs has announced a Special Liquidity Scheme for NBFCs or HFCs of Rs. 30,000 crores on March 13 2020. The Reserve Bank of Indian (RBI) will offer funds for the Scheme by subscribing to Government assured distinct securities issued by the Trust. The total amount of the special securities issued unsettled shall not exceed Rs. 30,000 crores. The Indian Government will offer an unrestricted and unchangeable guarantee to the special securities issued by the Trust. Also, this Scheme is being launched on July 01, 2020, through a <strong><em>Special Purpose Vehicle<\/em><\/strong> in the SLS Trust form set up by <strong><em>SBI Capital Markets Limited (SBICAP)<\/em><\/strong>. Scroll down to check more information regarding Special Liquidity Scheme for NBFCs or HFCs.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a8fa8a1194\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a8fa8a1194\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/special-liquidity-scheme-for-nbfcs-or-hfcs\/#Lets_Understand_the_Special_Liquidity_Scheme\" title=\"Let\u2019s\nUnderstand the Special Liquidity Scheme\">Let\u2019s\nUnderstand the Special Liquidity Scheme<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/special-liquidity-scheme-for-nbfcs-or-hfcs\/#What_are_the_Conditions_Related_to_Eligibility_Criteria_Drafted_by_RBI\" title=\"What\nare the Conditions Related to Eligibility Criteria Drafted by RBI?\">What\nare the Conditions Related to Eligibility Criteria Drafted by RBI?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/special-liquidity-scheme-for-nbfcs-or-hfcs\/#Restrictions_of_Special_Liquidity_Scheme_for_NBFCs_or_HFCs\" title=\"Restrictions\nof Special Liquidity Scheme for NBFCs or HFCs\">Restrictions\nof Special Liquidity Scheme for NBFCs or HFCs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/special-liquidity-scheme-for-nbfcs-or-hfcs\/#What_are_the_Effects_of_Special_Liquidity_Scheme_for_NBFCs_or_HFCs\" title=\"What are the Effects of Special Liquidity Scheme for NBFCs or HFCs?\">What are the Effects of Special Liquidity Scheme for NBFCs or HFCs?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/special-liquidity-scheme-for-nbfcs-or-hfcs\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Lets_Understand_the_Special_Liquidity_Scheme\"><\/span><strong>Let\u2019s\nUnderstand the Special Liquidity Scheme<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>This\nScheme was launched on the occasion when the majority of the Non-Banking\nFinancial Companies were looking for financial leverage from the Government of\nIndia to alleviate their financial status. Special Liquidity Scheme was\nsupported by Rs. 30,000 crores relief fund. The RBI was the only one who funded\nthis Scheme after subscribing to the Government related special securities. The\nSpecial Liquidity Scheme for NBFCs or HFCs follows lots of positive atmospheres\nsince it got the help of the nation&#8217;s leading apex bodies. It was also expected\nto advance the financial status of the present NBFCs and HFCs in India.<\/p>\n\n\n\n<p>This\nScheme will remain open for three months for making contributions by the Trust.\nThe lending period (CPs or NCDs of NBFCs or HFCs for a short time of up to\nninety-day) will be for a period of up to 90 days or three months. The funding\nwould be used by the Non-Banking Financial Companies or Home Finance Company\nonly to repay current liabilities and not to increase assets. Moreover, those\nmarket participants who are seeking to exit their standard investments with a\nlasting maturity of ninety days may also approach the SLS Trust.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Conditions_Related_to_Eligibility_Criteria_Drafted_by_RBI\"><\/span><strong>What\nare the Conditions Related to Eligibility Criteria Drafted by RBI?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" class=\"text-primary\"><strong>NBFC Registration<\/strong><\/a> done under the Reserve Bank of India Act, 1934, including Microfinance Companies registered with RBI (excluding those companies registered as Core Investment Companies) and any <strong><em>HFC (Home Finance Company)<\/em><\/strong> registered with <strong><em>NHB (National Housing Bank) <\/em><\/strong>under the <strong><em>National Housing Bank Act, 1987; <\/em><\/strong>which is fulfilling with the following conditions or guidelines will be qualified to raise funding from the proposed facility:<\/p>\n\n\n\n<ol><li>Non-Banking Financial Companies with\ninvestment-grading ratings were only permitted to the Scheme;<\/li><li>The net Non-Performing Assets (NPA) for Non-Banking\nFinancial Company should not exceed the maximum limit (6%) as of March 31,\n2019;<\/li><li>They are required to meet the requirement of\nSpecial Purpose Vehicle (SPV) for an appropriate level of surety from the\nentity;<\/li><li>Companies should obey to profitability as far as\nthe monetary standing is concerned for the last two years;<\/li><li>Home Finance Companies should be registered\nunder the NHB Act, 1987 have access to Special Liquidity Scheme for NBFCs or\nHFCs;<\/li><li>The Capital Adequacy Ratio of Non-Banking\nFinancial Company or Home Finance Company must not be lower than 15% and 12%\nrespectively as of March 31, 2019;<\/li><li>They should remain outside the Scheme of <strong><em>Special\nMention Accounts (SMA-1 or 2) <\/em><\/strong>for their borrowing in the last one year before\nAugust 01, 2019.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Restrictions_of_Special_Liquidity_Scheme_for_NBFCs_or_HFCs\"><\/span><strong>Restrictions\nof Special Liquidity Scheme for NBFCs or HFCs<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following\nare some restrictions of the Special Liquidity Scheme for NBFCs or HFCs:<\/p>\n\n\n\n<ol><li>It cannot be used for extending lending\nservices;<\/li><li>This Scheme only aim to extinguish present\nliabilities for Non-Banking Financial Company;<\/li><li>It shows un-biasness as it aids major players.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Effects_of_Special_Liquidity_Scheme_for_NBFCs_or_HFCs\"><\/span>What are the Effects of Special Liquidity Scheme for NBFCs or HFCs?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following are some effects or results of the Special Liquidity Scheme for NBFCs or HFCs that have been observed:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" loading=\"lazy\" width=\"998\" height=\"380\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/04\/Infographic-for-Swarit.png\" alt=\" Special Liquidity Scheme for NBFCs\" class=\"wp-image-4039\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/04\/Infographic-for-Swarit.png 998w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/04\/Infographic-for-Swarit-300x114.png 300w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/04\/Infographic-for-Swarit-768x292.png 768w\" sizes=\"(max-width: 998px) 100vw, 998px\" \/><\/figure><\/div>\n\n\n\n<ol><li><strong><em>Disbursal Negligence<\/em><\/strong>: According\nto the certified data, the Special Liquidity Scheme has been unsuccessful to expend\nthe allocated fund of the Rs. 30,000 crores to the Non-Banking Financial\nCompanies in the suggested time limit. Only Rs. 7,227 crores of funds have been\ndirected to the possible credit seekers at the end of the Scheme. Till\nSeptember 30, 39 proposals, including Rs. 11,120 crores was approved. Out of\nthis approved expanse, Rs. 7,227 has been credited, whereas Rs. 182 crores end\nup useless. Moreover, the remaining amount Rs. 3,707 crores have lapsed.<\/li><li><strong><em>Poor Organizing of Scheme<\/em><\/strong>: There\nis no disagreement that the Special Liquidity Scheme for NBFCs or HFCs lacks\neverything that innovative establishments wanted for. After all, there is no\nsuch point in accessing a liquidity scheme that does not resolve the primary\nproblem. Hereafter, the centre should look for another way by preventing the\nexisting practice for structuring or organizing the Special Liquidity Scheme\nfor NBFCs or HFCs. They should be accomplished left a negative impression on\nthe Government.<\/li><\/ol>\n\n\n\n<p>By\ntaking perception from stakeholders would help the Indian Government to shape a\nbetter scheme. Any twist after the deployment could be a monotonous task for\nthe Government. The problem with such a scheme was that it was the only\nproviding to a thin range of credit searcher, and this is why the substantial\nportion of the Scheme&#8217;s fund remained untouched.<\/p>\n\n\n\n<ul><li><strong><em>Unable to meet the requirements:<\/em><\/strong> Though\nthe Government of India was keen to support the industry, the way this Scheme\nwas drafted and executed, is not satisfying the requirement of the Non-Banking\nFinancial Company system from a practical point of view. Special Liquidity\nScheme is meant to help the NBFCs by fulfilling the requirements dealing with\nsome strict liabilities issues.<\/li><\/ul>\n\n\n\n<p>Still, there is a sign of expectation as the Government is planning to distribute the remaining funds to the NABARD or <strong>SIDBI<\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Small_Industries_Development_Bank_of_India\" class=\"text-primary\"><strong>[1]<\/strong><\/a><\/sup>. Such bodies will soon launch direct liquidity support to the freshly established Non-Banking Financial Company via term loans. The expenditure of such funds will not take the credit rating into account. As per the assumption of an expert, this may not be a game-changer, but at least it would lower than turbulence for financial needs to some extent.<\/p>\n\n\n\n<p>In the past\nfew months, the NBFCs (Non-Banking Financial Companies) have been catering\ntheir payment commitment in a better way, yet their balance sheet says\notherwise. These companies were waiting for a constant remedy to re-balance\ntheir asset-liability discrepancy. They would instead choose for new borrowings\navailable for longer terms to help the lending purpose. The present situation\ndemands the debts market to starts rolling out funds for credit searchers\nwithout risk or credit aversion.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>This Scheme is one of a generous that solidifies no benefit to small &amp; medium Non-Banking Financial Companies. It\u2019s weird that how the Scheme with such an absolute amount of the fund went unproductive. The Finance Ministry and the Government of India require to work from the ground up to a new and better scheme that holds the primary problems instead of pointless matters.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-impact-on-vehicle-and-housing-loan-sector\/\">NBFC Impact on Vehicle and Housing Loan Sector \u2013 An Overview\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>To develop the liquidity position of NBFCs (Non-Banking Financial Company) or HFCs (Home Finance Company), the Union Minister for Finance and Corporate Affairs has announced a Special Liquidity Scheme for NBFCs or HFCs of Rs. 30,000 crores on March 13 2020. The Reserve Bank of Indian (RBI) will offer funds for the Scheme by subscribing [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":4034,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[58],"tags":[571],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/4031"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=4031"}],"version-history":[{"count":8,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/4031\/revisions"}],"predecessor-version":[{"id":4041,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/4031\/revisions\/4041"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/4034"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=4031"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=4031"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=4031"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}