Govt to provide credit guarantee to PSBs to buy NBFC assets

The government Friday said it will provide one-time partial credit guarantee to public sector banks to buy rated pooled assets of financially sound NBFCs. "For purchase of high rated pooled assets of financially sound NBFCs amounting to a total of Rs 1 lakh crore during the current financial year, government will provide one time six-month partial credit guarantee to PSBs for first lot of up to 10 per cent," Finance Minister Nirmala Sitharaman said in her maiden Union Budget 2019-20.

She said NBFCs are playing an important role in sustaining credit demand and maintaining capital formation in the small and medium industrial segment. Non-banking financial companies (NBFCs) that are fundamentally strong continue to get funding from banks and mutual funds without being unduly risk-averse, Sitharaman said.

The minister also proposed to bring NBFCs under the regulation of the RBI for better oversight and to strengthen monitoring of the sector effectively.