Mumbai: The government is in the process of approving buyouts of non-bank loans by public sector banks worth ₹20,000 crore under the partial credit guarantee scheme, said Finance Secretary Rajiv Kumar.

This is one-fifth of the guaranteed corpus of ₹1 trillion under this scheme.

"We have supporting sanctions of ₹20,000 crore plus and the guarantee is being extended. Some formalities are being done as each case goes to the government to be cleared. That is taking little time," said Kumar.

Kumar was speaking on the sidelines of Union Bank of India's 101st foundation day event in Mumbai.

Kumar added that even prior to this scheme, banks have been buying pooled assets, especially since last year following defaults by IL&FS.

Non banking finance companies (NBFCs), including housing finance companies, have been under stress following the series of defaults by group companies of Infrastructure Leasing & Financial Services Ltd. (IL&FS) last year. Finance minister Nirmala Sitharaman announced the scheme in her FY20 budget to ensure that financially sound NBFCs continue to get bank funding.

"For purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of ₹1 lakh crore during the current financial year, the government will provide one-time six months' partial credit guarantee to public sector banks for first loss of up to 10%," Sitharaman had said.

Under the current guidelines for this scheme, the pool of assets should have minimum rating of 'AA' or equivalent at fair value prior to the partial credit guarantee by the government of India. The guidelines also said that the NBFCs registered with RBI and housing finance companies registered with National Housing Bank can take benefit under the window.

Mint reported on 22 September that shadow lenders may be gasping for cash, but their securitized loans are selling like hot cakes, even in the midst of a raging liquidity crisis.

Non-banking financial companies (NBFCs) and housing finance companies (HFCs) raised ₹2.36 trillion through the securitization route between October 2018 and September 2019, data compiled by rating agency Icra showed.

While NBFCs and HFCs are selling securitized loans amid tight liquidity, it also highlights buyer interest. The heightened issuance of pass-through certificates (PTC) and direct assignments (DA), two kinds of loan sell-downs, began with the system-wide liquidity crunch sparked by the collapse of Infrastructure Leasing and Financial Services Ltd in September 2018.

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