The Ministry of Finance vide press release on 20.05.2020 states that the Union Cabinet has approved the Sovereign portfolio guarantee of up to 20% of first loss for purchase of Bonds or Commercial Papers (CP) with a rating of AA and below (including unrated paper with original/initial maturity of up to one year) issued by Non-Banking Financial Company(NBFC), MFCs, Micro Finance Institution(MFI) by Public Sector Banks   (PSB) through an extension of the Partial Credit Guarantee Scheme(PCGS). The union cabinet was chaired by the Prime Minister Shri Narendra Modi.

Further, the Cabinet approved modifications in the existing PCGS on purchase of pooled assets, increasing its coverage by—

  • Making NBFCs/HFCs reported under Special Mention Account (SMA-1) category on technical reasons alone during the last one-year period prior to 1.8.2018 eligible. 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 FY2017-18, FY 2018-19 and 2019-20. Earlier, the NBFC/HFC should have made a net profit in at least one of the financial years of FY 2017-18 and2018-19.
  • 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 31.3.2019 were eligible under the Scheme.
  • Extending the Scheme from 30.6.2020 to 31.3.2021 for purchase of pooled assets.

Further, the time limit for the above mentioned one-time partial guarantee offered by the Government of India is available till 31.05.2020 for purchase of pooled assets and for the period as specified under the Scheme for purchase of Bonds/CP or till such date by which Rs. 10,000 (Ten thousand) crores worth of guarantee including both guarantees toward purchase of pooled assts and Bonds/CP is provided by the Government (whichever is early).

Earlier, the existing PCGS was issued dated 11.12.2019 which provided offering of sovereign guarantee up to 10% of the first loss to PSB for purchasing pooled assets worth rated BBB+ or above worth up to Rs. 1,00,000 crores (One lakh Crores) from financially sound NBFC/MFC. The abovementioned step is initiated in view of extending support to these financial institutions. It is anticipated that the steps taken would benefit in restoring and helping the financial sector and other stakeholders in facing the challenges amidst the COVID-19 lockdown.


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