Cabinet nod for modifications in existing Partial Credit Guarantee Scheme (PCGS)
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Cabinet nod for modifications in existing Partial Credit Guarantee Scheme (PCGS)

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New Delhi, May 20 : The Union Cabinet, chaired by the Prime Minister Narendra Modi, on Wednesday approved the sovereign portfolio guarantee of upto 20 per cent of first loss for purchase of Bonds or Commercial Papers (CPs) with a rating of AA and below issued by NBFCs/MFCs/Micro Finance Institutions (MFIs) by Public Sector Banks (PSBs) through an extension of the Partial Credit Guarantee Scheme (PCGS).

The Cabinet also approved modifications in the existing PCGS on purchase of pooled assets, increasing its coverage by making NBFCs/HFCs reported under SMA-1 category on technical reasons alone during the last one year period prior to August 1, 2018 eligible, an official release said. Earlier NBFCs/HFCs reported as SMA-1 or SMA-2 during this period were ineligible under the scheme. “Relaxing the net profit criteria to the extent that the concerned NBFC/HFC should now have made a profit in at least one of the financial years of FY 2017-18, FY 2018-19 and 2019-20”, it said.

Earlier, the NBFC/HFC should have made a net profit in at least one of the financial years of FY 2017-18 and 2018-19. The government also increased its coverage by relaxing the criteria regarding date of origination of assets to include new assets originating up to at least six months prior to the date of initial pool rating.

Earlier, only assets originated up to March 31, 2019 were eligible under the scheme. It also extended the scheme from June 30, 2020 to March 31, 021 for purchase of pooled assets. The government said the existing PCGS was issued on December 11, 2019 offering sovereign guarantee of up to 10 per cent of first loss to PSBs for purchasing pooled assets worth rated BBB+ or above worth up to Rs 1,00,000 crore, from financially sound NBFCs/ MFCs.

According to the government, the outbreak of COVID-19 along with lockdown of business activity has now necessitated adoption of additional measures to support NBFCs and HFCs. (UNI)

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