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Funds to boost NBFCs, HFCs and Realty may flow soon

Rs 20kcr proposals likely to get nod in 2 weeks; FM promises support to any sector that needs help. Finance minister Nirmala Sitharaman promised support to any other sector that may need help following a finance ministry presentation on ‘Major Interventions to Boost the Economy’ in the Capital on Friday.

ET Bureau|
Updated: Dec 14, 2019, 06.55 AM IST
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Buzz of increasing GST rates everywhere except my office: FM Nirmala Sitharaman
Buzz of increasing GST rates everywhere except my office: FM Nirmala Sitharaman
NEW DELHI: The government’s schemes to help revive the flagging economy by supporting nonbanking finance companies (NBFCs) and housing finance companies (HFCs) and restarting stalled real estate projects are likely to start disbursing funds soon.

Finance minister Nirmala Sitharaman promised support to any other sector that may need help following a finance ministry presentation on ‘Major Interventions to Boost the Economy’ in the Capital on Friday.

Under the partial credit guarantee (PCG) schemes for NBFCs, 17 proposals worth a total Rs 7,657 crore have been okayed within two days of the cabinet deciding to lower the ratings threshold from AA to BBB+ for asset pools and clearing support for borrowers that had slid into SMA-0 category. SMA refers to Special Mention Account, a bad loan early warning system.

“Proposals amounting to about Rs 20,000 crore are expected to be approved over the next two weeks,” chief economic adviser Krishnamurthy Subramanian said during the presentation. He classified the steps that have been taken by the government in recent months into three — those that support consumption, those aimed at boosting investment, and reform measures.

“There is substantial traction on this partial guarantee scheme for NBFCs and HFCs, which in turn will also foster consumption on the retail side,” he said. The government will provide a part guarantee for support extended by public sector banks that purchase highly rated pooled assets of financially sound NBFCs and HFCs.

The government had announced the scheme in the July budget to support NBFCs and HFCs unable to raise funds due to stiff eligibility conditions.

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I-T Refunds
Other measures in the consumption basket include clearing government and public sector unit (PSU) dues, and supporting micro, small and medium enterprises (MSMEs) via bill discounting and tax refunds.

The total sanctioned support to NBFCs and HFCs is Rs 4.47 lakh crore, which includes Rs 1.29 lakh crore for pooled buyouts of assets. The government and PSUs have cleared dues up to Rs 61,000 crore previously, in two stages, which has injected funds into the system. PSU dues are now at Rs 4,877 crore.

“Together, these four measures are intended to bring more cash flow and foster consumption in the economy,” he said.

Revenue secretary Ajay Bhushan Pandey said the income tax department has issued refunds worth Rs 1.57 lakh crore in the first eightand-a-half-months of the current fiscal compared with Rs 1.23 lakh crore in all of FY19, which will also help consumption.

REAL ESTATE FUND
The Rs 25,000 crore SWAMIH (Special Window for Affordable and Mid-Income Housing) Investment Fund to get stalled real estate projects moving is fully operational and the investment committee is completing due diligence on the first set of deals, the CEA said.

As many as 13 domestic investors have joined the fund including Housing Development Finance Corp, State Bank of India and the Life Insurance Corp of India, committing a corpus of Rs 10,530 crore.

“This fund is fully operational and the investment committee is completing due diligence on the first set of deals today as we talk,” Subramanian said, adding the necessary changes have been made in the Insolvency and Bankruptcy Code (IBC).

The government expects the real estate fund to have a bigger impact on the economy through linkages.

“The construction cost is about one-fifth of the project,” the CEA said. “If we suppose that on an average these projects are half done, at least 10 times (will be) the impact of this last-mile funding — so about Rs 2.5 lakh crore.”

The government had proposed the fund in November to revive stalled projects, putting their number at 1,600, involving 458,000 housing units.

The alternative investment fund (AIF), which will be managed by SBI Caps, will provide priority debt financing for the completion of stalled housing projects that are in the affordable and middle-income housing sector.

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ECONOMY

Sitharaman refused to comment on the state of the economy but promised support where needed.

“I am looking at the economy, where I need to intervene. I am intervening and I shall continue to, addressing the problem of industry as and when it rises. So, I am not yet in that stage to say any predictions,” she said in response to a question on a likely recovery.

The Indian economy grew 4.5% in the September quarter and data released on Thursday showed industrial production contracted for a third month running in October, falling 3.8% from a year ago.

She refused to comment when asked if the economy had entered a period of stagflation with inflation rising and growth slowing. “No comments on that. I have heard it. Stagflation is the narrative which is going on. I am hearing it,” she said.

Sitharaman promised help to those unable to get credit from banks.

“If there are people who feel there is difficulty, that they are not getting the credit that they want from the banks, they are welcome to approach us,” Sitharaman said, adding that lenders had engaged with borrowers through outreach programmes.

She said onion prices had started to come down in some markets though not to the extent they should. A committee of ministers was monitoring the situation and crops have started coming into the market gradually.

The finance ministry hasn’t yet discussed proposals for the upcoming GST Council meeting scheduled for December 18. “The buzz is everywhere else other than in my office,” she said in response to a question on GST rates.
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