RBI healing touch for NBFC, HFCs post-COVID-19 lockdown; allows liquidity scheme benefit of SBI's SPV

Providing huge relief to the Non Banking Financial Companies (NBGCs) and Housing Finance Companies (HFCs), the Reserve Bank of India (RBI) has allowed both of them to avail of the benefit of special liquidity scheme under Special Purpose Vehicle (SPV). The State Bank of India (SBI) is coming with SPV via its subsidiary SBI Cap and the RBI's decision will help NBFCs and HFCs to qualify for its special liquidity scheme.

All NBFCs and HFCs except Core Investment Companies (CIC) or liberalized NBFCs won't be eligible for this SBI's SPV arrangement. On eligibility criteria for the NBFCS and HFCs for this SBI's SPV benefit, the central bank made it clear that those NBFCs and HFCs whose Capital Risk Adequacy Ratio (CRAR) is 15 per cent or above till 31st of March 2019, will be eligible for this special liquidity arrangement. The NBFCs and HFCs looking forward to avail of this SBI's SPV benefit needs to check about their NPA (Non Performing Asset) as well. As per the RBI directives, only those NBFCs and HFCs will be eligible for this benefit whose NPA is less than 6 per cent till 31st March 2019.

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To become eligible for this special liquidity scheme, NBFC's and HFC's strong balance sheet will have a huge role to play. As per the RBI's set of guidelines NBFCs and HFCs applying for this special liquidity scheme benefit must have registered profit in either of FY2017-18 or FY2018-19. Apart from this, the applicant NBFC and HFC shouldn't have been in the SMA 1 or SMA 2 category before 1st August 2018 and they must have the investment grade rating from a SEBI registered rating agency. If an NBFC and HFC fulfills these eligibility criteria and they are ready to abide by the  SBI's SPV collateral norms, they can easily get the special liquidity scheme benefit after the approval from the RBI.