Under the special liquidity scheme, the SPV will purchase the short-term papers from eligible non-banking financial companies (NBFCs)/housing finance companies (HFCs), which will utilise the proceeds under this scheme solely for the purpose of extinguishing existing liabilities.
"The Government of India has approved a scheme to improve the liquidity position of NBFCs/HFCs through a SPV to avoid any potential systemic risks to the financial sector," the Reserve Bank said.
The instruments will be commercial papers (CPs) and non-convertible debentures (NCDs) with a residual maturity of not more than three months and rated as investment grade, the RBI said.
"The facility, however, will not be available for any paper issued after September 30, 2020 and the SPV would cease to make fresh purchases after September 30, 2020 and would recover all dues by December 31, 2020," it added.
NBFCs -- including microfinance institutions, excluding those registered as core investment companies -- and housing finance companies that are registered under the National Housing Bank Act can avail the special liquidity scheme.
However, their net non-performing assets should not be more than 6 per cent as on March 31, 2019 and they should have made net profit in at least one of the last two preceding financial years (2017-18 and 2018-19).
There are other conditions, like the entities should be rated investment grade by a SEBI registered rating agency, it said. NKD CS MKJ