RBI asked to provide liquidity to IDBI

The Union Cabinet today approved the framework for addressing the liquidity constraints of Non-Deposit taking Systemically Important Non Banking Finance Companies (NBFC)s. For this purpose, Stressed Assets Stabilization Fund, set up for the purpose of acquiring the stressed assets of Industrial Development Bank of India (IDBI), would function as a Special Purpose Vehicle (SPV). The SPV would issue government guaranteed securities as per requirement, subject to a total amount of securities outstanding not exceeding Rs200bn with an additional Rs50bn, if needed. These securities would be purchased by Reserve Bank of India (RBI) and funds would be used by the SPV to acquire only investment grade Commercial Paper and Non-Convertible Debentures of the NBFCs. The RBI will issue guidelines for pricing and lending in consultation with Department of Financial Services. The funds will be used by NBFCs only to repay existing liabilities.