Centre extends Partial Credit Guarantee Scheme 2.0 for NBFCs with more flexibility
The Central government has extended the Partial Credit Guarantee Scheme 2.0 (PCGS) for non-banking financial companies (NBFC) by three months and has allowed more flexibility to build up the portfolio, an official statement said on Monday.
"Additional 3 months have been granted to build up the portfolio. At the end of six months, i.e. by 19.11.2020, the portfolio shall be crystallised, based on actual amount disbursed, for the guarantee to come into effect," a Finance Ministry statement said.
Further, allowing more flexibility, the government has decided that the 'AA' and 'AA-' investment sub-portfolio under the scheme should not exceed 50 per cent, instead of the 25 per cent stipulated earlier, of the total portfolio of bonds or commercial papers purchased by public sector banks under the scheme.
The PCGS 2.0, launched under the Aatmanirbhar Bharat economic package aimed to provide portfolio guarantee for purchase of bonds or commercial papers (CPs) with a rating of AA and below issued by NBFCs, HFCs and MFIs by public sector banks.
It was envisaged to purchase bonds or commercial papers of Rs 45,000 crore under PCGS 2.0, of which the maximum headroom permissible for purchase of bonds or commercial papers rated 'AA/AA-' was 25 per cent of the total portfolio, or Rs. 11,250 crore.
Under PCGS 2.0, PSBs have approved purchase of securities rated 'AA/AA-' issued by 28 entities and securities rated below 'AA-' issued by 62 entities, amounting to Rs 21,262 crore overall.
The ministry noted that the average ticket size of bonds and commercial papers rated below 'AA-' is significantly lower than the average ticket size of those rated 'AA/AA-'.
The statement said that the government has made the latest decisions, keeping in view the progress under the scheme and the fact that the stipulated limit for 'AA/AA-' rated securities has been nearly reached, while the appetite for lower rated securities is nearing saturation, considering their lower ticket size.
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