Ministry of finanace (MoF) has convened a meeting of the chiefs of some of the large public serctor banks next week to sort out the structural issues affecting the non-banking finance companies.

The chiefs of some of the large state-owned banks including OP Bhatt, chairman, State Bank of India and TS Nrayanasami, chairman & managing director, Bank of India, will meet finance secretary Arun Ramanathan on March 17 and 18 to take stock of the funding constraints faced by the NBFCs.

Confirming the development, TS Narayanasami, chairman and managing director of Bank of India, who is also the chairman of Indian Banks’ Association (IBA), told FE that he would be leading a delegation comprising heads of some of the big state-owned banks to meet the finance secretary to discuss various structural related issues of NBFCs.

Earlier in a letter to the Finance Industries Development Council (FIDC), the representative body of NBFcs, the government had approved a scheme for addressing the liquidity constrains of non-deposit taking non-banking finance companies (NBFCs). It was also decided that the Stressed Assets Stabilisation Fund, which was set up for the purpose of acquiring the stressed assets of Industrial Development Bank of India, would function as a special purpose vehicle (SPV) for providing funds to these NBFCs.

The SPV would issue government guaranteed securities as per requirement, subject to a total amount of securities outstanding not exceeding Rs 20,000 crore with an additional Rs 5,000 crore, if needed.

These securities would be purchased by the Reserve Bank of India and funds would be used by the SPV to acquire only investment grade commercial papers (CPs) and non-convertible debentures (NCDs) of NBFCs. The government has issued guidelines for pricing and operation of the scheme to the SASF Trust in consultation with the RBI. The funds will be used by NBFCs for meeting adverse asset liability mismatches and not for supporting business growth or asset expansion.A letter was sent to the FIDC in this regard finance ministry.

At a meeting of FIDC, IBA, public sector banks, ministry of finance and government held in Delhi in February, leading public sector banks reaffirmed their commitment to fund asset financing for NBFCs. This was following the meeting held in January relating to the funding for NBFCs involved in financing commercial vehicles, in the wake of the second stimulus package announced by the government .