The special funding scheme, under which the stressed assets stabilisation fund (SASF) of IDBI Bank has been appointed by the Centre to function as a special purpose vehicle (SPV) to provide liquidity support to non-banking finance companies (NBFCs), has evoked a lukewarm response.
The SPV, which has total funding support of Rs 20,000 crore so far, has been able to settle only one NBFC case. The key reason for the lukewarm response has been that the loans being offered by the SPV are only in the form of commercial papers (CPs) and certificate of deposits (CDs) at an interest rate of 12.5% and are in the form of short-term loans.
The loans that are disbursed under the scheme are to be repaid within a period of 90 days only, whereas the NBFCs are interested in long-term loans. Cholamandalam DBS is the only beneficiary of the SPV funding that has been sanctioned loan worth Rs 750 crore, out of which a sum of Rs 200 crore has already been disbursed. The remaining amount is likely to be disbursed by the month-end.
Talking to FE, B Ravindranath, executive trustee, SASF, said, ?It is merely a month when the SPV was formed and we have got quite a few queries from some NBFCs.?
Under the SPV, government-guaranteed securities are sold to Reserve Bank of India as per the requirement and which is later converted into CPs and CDs for the disbursement of loans.
The Union finance secretary, Arun Ramanathan, who was supposed to hold a meeting of the heads of a few leading public sector banks on March 17 on the issue of restructuring of loans to NBFCs, had postponed the meeting the fresh date for the same is yet to be declared.
Giving information about the activities of the SASF, which came into operation since September 2004, Ravindranath said, ?Out of 631 cases which were valued at Rs 9,000 crore that were transferred to us , we have already resolved 476 cases worth Rs 5,230 crore until now. It includes a sum of Rs 475 crore which was resolved during the current financial year. The remaining cases are under the process of settlement by the fund which acts on the cash-neutral mechanism. The settlement is done by the fund in forms like one-time settlement, sale of assets or restructuring of those companies that are no longer commercially viable. As of now, we have transferred Rs 4,084 crore to the IDBI Bank which it can used for banking operations which includes lending. A very negligible amount has been transferred to assets reconstruction companies like Arcil for the simple reason that Arcil provides us security receipts whereas we are interested in cash payments.?
