New Delhi, July 1: The Reserve Bank of India on Wednesday said that the government has approved a special scheme to improve the liquidity position of NBFCs (Non-Banking Finance Companies) and HFCs (Housing Finance Companies) to avoid any potential systemic risks to the financial sector. 'Open Market Operations' to be Conducted by RBI on Wednesday to Pump Liquidity in Financial System.

The RBI also laid out certain eligibility criteria for liquidity scheme. The order said that the NBFCs, including Microfinance Institutions, should be registered with the central bank, under the Reserve Bank of India Act, 1934, excluding those registered as Core Investment Companies.

"Housing Finance Companies that are registered under the National Housing Bank Act, 1987" is one of the conditions by RBI. The next point says that the "CRAR/CAR of NBFCs/HFCs should not be below the regulatory minimum, i.e., 15% and 12% respectively as on March 31, 2019."

Check All Conditions Laid Out by RBI:

The RBI said that the State Bank of India’s subsidiary SBICAP has set up an SPV (special purpose vehicle)- SLS Trust to manage this operation. "The SPV will purchase the short-term papers from eligible NBFCs/HFCs, who shall utilise the proceeds under this scheme solely for the purpose of extinguishing existing liabilities. The instruments will be CPs and NCDs with a residual maturity of not more than three months and rated as investment grade," the order said.

(The above story first appeared on LatestLY on Jul 01, 2020 04:41 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).