New Delhi: Niti Aayog Vice Chairman Rajiv Kumar has described the current economic slowdown as an "unprecedented situation that India has not faced in last 70 years". His comments have come at a time when the country's economy is facing the worst pace of growth in nearly five years.

"From last 70 years, government of India has not faced this sort of liquidity situation where entire financial sector is in churn and nobody is trusting anybody else," news agency ANI quoted Kumar as saying on Thursday.

He further said that the government is considering a number of measures which will be taken at an appropriate time to deal with financial stress and unleash animal spirit in the economy. Both the government and the RBI have taken a series of measures to deal with stress in the financial sector triggered by default in the group companies of IL&FS.

In a bid to improve liquidity, Kumar said the central bank has taken various steps in the past few months as a result of which the cash position in the system has stabilised. He further said public sector banks have provided liquidity to non-banking finance companies (NBFCs).

He said the RBI has reduced repo rate four consecutive times this year and also directed the banks to pass rate cut benefits to borrowers. Kumar further said that the government has taken a series of measures to improve the financial health of the NBFC sector. The government permitted public sector banks to purchase high-rated pooled assets of financially sound NBFCs.

For this, the government provided one-time six months' partial credit guarantee to PSBs for first loss of up to 10 per cent. Earlier this month, the Centre issued guidelines on operationalising Rs 1-lakh crore partial guarantee scheme under which public-sector banks can purchase high-rated pooled assets of financially sound non-banking finance companies (NBFCs).

The partial guarantee would help rework the Asset Liability structure within three months to have positive Asset Liability Management in each bucket for the first three months and on cumulative basis for the remaining period.

As per the guidelines issued, the window for one-time partial credit guarantee will be for a period of six months, or till such date by which Rs 1 lakh crore assets get purchased by banks.

Assets originated up to March 31, 2019 will only be eligible under this scheme, it said, adding assets should be standard in the books of NBFCs/HFCs on the date of sale.

Among others the government also allow NBFCs to raise funds in public issues, and the requirement of creating a debenture redemption reserve (DRR), which is currently applicable for only public issues as private placements are exempt, will be done away with.

As of now, NBFCs that do public placement of debt have to maintain a DRR and in addition, a special reserve as required by the RBI has also to be maintained. In a bid to improve regulatory oversight, the government also proposed to bring housing finance companies under the RBI from the fold of National Housing Bank. All these steps are aimed at improving the condition of the NBFC sector as a whole, Kumar said.

(With inputs from PTI)