Special liquidity scheme for NBFCs/HFCs approved
Part of: GS-Prelims and GS-III – Economy
- Recently, the proposal to launch a new Special Liquidity Scheme for Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) was approved.
- This shall improve liquidity position of the NBFCs/HFCs.
- A large public sector bank would set up a Special Purpose Vehicle (SPV) to manage a Stressed Asset Fund (SAF) whose special securities would be guaranteed by the Government of India and purchased by the Reserve Bank of India (RBI) only.
- The SPV would issue securities as per requirement.
- Total amount of securities should not exceed Rs. 30,000 crore.
- The Scheme will be administered by the Department of Financial Services.
Important value additions
Non-Banking Financial Company
- It is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency.
- The most important difference between non-banking financial companies and banks is that NBFCs don’t take demand deposits.
Housing Finance Company
- It is a company registered under the Companies Act, 1956.
- It primarily transacts business of providing finance for housing, directly or indirectly.