The Union Cabinet, on 20th May 2020 has approved the Sovereign portfolio guarantee of up to 20% of first loss for purchase of Bonds or Commercial Papers (CPs) with a rating of AA and below.
This is a one-time partial credit guarantee offered by the government. It will remain open till March 31, 2021, on purchase of pooled assets and for the period as specified under the Scheme for purchase of Bonds or CPs, or till such date by which Rs 10,000 crores worth of guarantees, including both guarantees toward the purchase of pooled assets and Bonds or CPs, are provided by the Government, whichever is earlier.
Further, the government has relaxed the net profit criteria to the extent that the concerned NBFC or HFC should now have made a profit in at least one of the financial years of FY2017-18, FY 2018-19 and 2019-20. Earlier, the NBFC/HFC should have made a net profit in at least one of the financial years of FY 2017-18 and 2018-19.
Considering the situations under the COVID-19 global pandemic, the government has brought in these relaxations for a period of one year.
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