Lenders to get additional funds to acquire bonds, debt instruments of stressed firms

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Reserve Bank of India (RBI) plans to give extra liquidity to banks that can be used to acquire goods or other debt instruments of stressed companies, sources said. Emergency Credit Line Guarantee Scheme (ECLGS) is a scheme for the stressed organizations by the government. After appendage of the Emergency Credit Line Guarantee Scheme (ECLGS), the Reserve Bank of India (RBI) is also planning to put out steps to give extra liquidity to stressed firms through banks and NBFCs.

Last week, the launch of the new version of the Emergency Credit Line Guarantee Scheme (ECLGS) was announced by the Finance Ministry for companies which have loan dues up to 30 days as of February 29, 2020, who will be given extra credit of 20 percent outstanding under the scheme.

K.V Kamath Committee, as well as the health care sector, point out entities in 26 stressed sectors, with credit outstanding of above Rs 500 crore as of February 29 are entitled to aid funding under the scheme, which is open up to March 31, 2021, is five years including one year of the moratorium on principal repayment.

Sources said that besides the government’s steps, RBI’s focal point of liquidity measures will now include the betterment of activity in distinct sectors that have both backward and forward connections, and multiplier results on growth. The RBI is ready to undertake any further measures as required to assure market participants of access to liquidity and easy financing conditions, RBI Governor Shaktikanta Das had said while unveiling the monetary policy in October.

In a bid to finer leverage the respective advantages of the banks and non-banking financial companies (NBFCs), the RBI newly decided to give substantial operational flexibility to the lending institutions, while asking them to conform to the regulatory guidelines on outsourcing and KYC. The first focal point of the new scheme, rechristened as a co-lending model, is to enhance the flow of credit to the unserved and underserved sectors at a fair cost. Of the 3 lakh crore of Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs banks have endorsed Rs 2.03 lakh crore out of which Rs 1.48 lakh crore has been handout till October 2020.

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