5 Steps taken to Ameliorate NBFC Crisis

1. Government nudges PSBs: The government has nudged public-sector banks to give a helping hand to the NBFCs in a bid to ease the liquidity crunch.
2. Partial Credit Gaurantee by GoI: Finance Minister Nirmala Sitharaman’s plan is that the government will provide one-time six months partial credit guarantee to public sector banks for purchase of assets of financially sound NBFCs, amounting to a total of Rs1 lakh crore, during the current financial year. This is for first loss of up to 10 per cent. As per the scheme, the guarantee will be valid for 24 months from the date of purchase. The assets will need to have a minimum AA credit rating, the eligible NBFCs should have made a profit in at least one of the past two years and their NPAs should not be more than 6 per cent.
3. Additional Liquidity: The RBI has announced additional liquidity facility to banks for purchase of assets from and on-lending to NBFCs and HFCs, which would help banks avail an additional liquidity of Rs1.34 lakh crore.
4. Relaxation in ECB Norms: RBI also relaxed end-use restrictions on external commercial borrowings (ECB). Eligible borrowers will now be able to raise ECB with a minimum average maturity period of 10 years for working capital purposes and general corporate purposes, and ECB with a minimum average maturity of seven years for repayment of rupee loans availed domestically for capital expenditure.
5. Continuous Monitoring: RBI Governor Shaktikanta Das said NBFCs were being monitored intensively on a regular basis to ensure that a situation of an institution collapsing would not arise.