Government releases Rs.200 bn for non-banking financial companies

January 9th, 2009 - 4:26 pm ICT by IANS  

New Delhi, Jan 9 (IANS) The government Friday released Rs.200 billion (Rs.20,000 crore/$4 billion) to meet the liquidity requirements of non-financial banking companies (NBFCs).”The measure has been taken because the RBI (Reserve Bank of India) otherwise cannot meet the liquidity requirements of NBFCs,” Home Minister P. Chidambaram told reporters after a cabinet meeting presided over by Prime Minister Manmohan Singh.

“If necessary, another Rs.5,000 crore (Rs.50 billion) could be released,” Chidambaram added.

“For this purpose, the Stressed Assets Stabilization Fund, set up for the purpose of acquiring the stressed assets of the Industrial Development Bank of India, would function as a special purpose vehicle (SPV),” the minister said.

The SPV would issue government guaranteed securities according to the requirements. The RBI would purchase the securities and the funds generated would be used by the SPV to acquire only investment grade commercial paper and non-convertible debentures of the NBFCs, Chidambaram said.

The RBI will issue guidelines for pricing and lending in consultation with department of financial services, the minister said, adding: “The funds will be used by NBFCs only to repay existing liabilities.”

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