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Last Updated : Aug 23, 2019 09:55 PM IST | Source: Moneycontrol.com

NHB to provide Rs 20,000 crore additional liquidity support to housing finance companies

This will increase the total liquidity support to Rs 30,000 crore, said finance minister Nirmala Sitharaman

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In order to boost credit support for the purchase of houses, National Housing Bank (NHB) will offer additional liquidity support of Rs 20,000 crore to housing finance companies (HFCs). This will increase the total liquidity support to Rs 30,000 crore, said Finance Minister Nirmala Sitharaman on August 23 while announcing a slew of measures to revive the economy.

“There will be more credit support for the purchase of houses, vehicles and consumption goods,” she added. Without adequate credit support, HFCs were not able to lend to homebuyers. This led to a drop in property sales.

Lack of adequate liquidity has become a cause of concern in the country due to an ongoing debt crisis among several large non-banking financial companies (NBFCs). This begun in June 2018 after the IL&FS group defaulted on inter-corporate deposits and commercial papers (borrowings) worth about Rs 450 crore. The repercussion was that banks went cautious in lending to such entities.

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Just three weeks ago on August 2, NHB had said it will infuse additional Rs 10,000 crore in HFCs to ease the flow of funds into the housing sectors. This, said NHB, would act as additional liquidity for individual housing loans for affordable housing.

With respect to the liquidity issue, Sitharaman said NHB has already settled some issues among the NBFCs (HFCs) and the liquidity situation has improved.

“NBFCs are now receiving liquidity from the banks and are also extending credit to people. The increase in funding by NHB will make a difference because we have already started moving in that direction,” she said.

To reduce stress in the NBFC sector, the finance minister has said the partial credit guarantee scheme for purchase of pooled assets of NBFCs/HFCs up to Rs 1 lakh crore will be monitored at the highest level in each of the banks. This pooled asset purchase was announced in the budget and is applicable for public sector banks.

In August 2019, the government had announced guidelines for the one-time credit guarantee to public sector banks (PSBs) for purchase of pooled non-banking financial companies’ (NBFC) assets.

Here, PSBs have been given a deadline of six months for the purchase of ‘pooled assets’ of NBFCs at a fair value. The government has said this one-time guarantee will be valid for 24 months from the date of purchase and can be invoked on the occurrence of default.

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First Published on Aug 23, 2019 07:58 pm
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