Financial stocks were in demand after the government on Wednesday launched special liquidity scheme of Rs 30,000 crore for the non-bank lenders.
Among the non-banking finance companies (NBFCs), Muthoot Capital Services (up 4.99%), Reliance Capital (up 4.94%), Mahindra & Mahindra Financial Services (up 4.36%), IDFC (up 2.96%), Indiabulls Housing Finance (up 2.41%), LIC Housing Finance (up 1.82%), Edelweiss Financial Services (up 1.51%), Bajaj Finance (up 0.9%), Muthoot Finance (up 0.62%), Bajaj Finserv (up 0.59%) and Manappuram Finance (up 0.57%) advanced.
Among the housing finance companies (HFCs), GIC Housing Finance (up 11.04%), Can Fin Homes (up 5.53%), HDFC (up 2.59%), Indiabulls Housing Finance (up 2.48%) and LIC Housing Finance (up 1.88%) edged higher.
Meanwhile, the S&P BSE Sensex was up 502.38 points or 1.42% to 35,916.83.
The Union Minister for Finance & Corporate Affairs Nirmala Sitharaman had announced the special liquidity scheme in March 2020 to improve the liquidity position of NBFCs and HFCs.
The Reserve Bank of India (RBI) will provide funds for the scheme by subscribing to government guaranteed special securities issued by the Trust. The total amount of such securities issued outstanding shall not exceed Rs 30,000 crores at any point of time.
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The Government of India will provide an unconditional and irrevocable guarantee to the special securities issued by the Trust. The scheme was launched on 1 July 2020 through a Special Purpose Vehicle in the form of SLS Trust set up by SBI Capital Markets (SBICAP).
Certain conditions have also been put in place for the NBFCs and HFCs to become eligible for the new scheme. The RBI underlined that NBFCs including microfinance institutions that are registered under the Reserve Bank of India Act, 1934, excluding those registered as core investment companies; HFCs that are registered under the National Housing Bank Act, 1987; firms with net NPAs less than 6%, as on 31 March 2019; firms that are rated as investment grade by a rating agency; and the firms which have made a net profit in at least one of the last two preceding financial years; will be eligible for the new scheme.
The scheme will remain open for 3 months for making subscriptions by the Trust. The period of lending (CPs/NCDs of NBFCs/HFCs for short duration of upto 90 days) by the Trust shall be for a period of upto 90 days. The financing would be used by the NFBCs/HFCs only to repay existing liabilities and not to expand assets. Further, those market participants who are looking to exit their standard investments with a residual maturity of 90 days may also approach the SLS Trust.
Meanwhile, Fitch Ratings on Wednesday said that the India's non-bank financial institutions (NBFI) will continue to face elevated near-term risks, even as economic activity picks up with the easing of the country's nationwide lockdown.
These risks revolve around liquidity and asset quality in particular and reflect the impact of the coronavirus pandemic on borrowers' repayment capabilities, as well as the effects of the moratorium on collections.
India, meanwhile, reported 2,26,947 active cases of COVID-19 infection and 17,834 deaths, according to the data from the Ministry of Health and Family Welfare, Government of India.
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