The government on Monday extended the Partial Credit Guarantee Scheme (PCGS) 2.0 till November 19, giving public sector banks (PSBs) three more months to purchase bonds and commercial papers (CPs) from non-banking financial companies (NBFCs) and housing finance companies (HFCs).
The government has also allowed public sector banks (PSBs) to invest up to 50 percent of total investments under the scheme in AA and AA-rated bonds. Earlier, the limit was 25 percent of total investments.
The PCGS 2.0 covers borrowings, such as the primary issuance of bonds/commercial papers of such firms, wherein the government will bear the first 20 percent of the loss. The government has said AA-rated papers and below, including unrated papers, will be eligible for investment.
The decision was taken in keeping in view the progress under the scheme and the fact that the stipulated limit for AA/AA- rated bonds/CPs has been nearly reached while the appetite for lower-rated bonds/CPs are nearing saturation considering their lower ticket size, the government said in a release.
“Additional 3 months have been granted to build up the portfolio. At the end of six months, i.e. by 19.11.2020, the portfolio shall be crystallized based on actual amount disbursed, for the Guarantee to come into effect,” the release said.
“At the portfolio level, AA and AA- investment sub-portfolio under the Scheme should not exceed 50% (instead of 25% stipulated earlier) of the total portfolio of Bonds/ CPs purchased by PSBs under the Scheme,” it added.
As part of Rs 20.97 lakh crore Atmanirbhar Bharat Abhiyan, announced by the government, the government launched the PCGS 2.0 on May 20, to provide portfolio guarantee for the purchase of papers issued by NBFCs/HFCs/microfinance institutions (MFIs) with a rating of AA and below, by PSBs.
