On August 17, 2020, the Partial Credit Guarantee Scheme (PCGS) 2.0 which was launched on May 20, 2020 as a part of Atmanirbhar Bharat Abhiyan has been extended by three months i.e. till November 11, 2020 in order to widen the coverage to include a larger number of non-banking financial companies (NBFCs), housing finance companies (HFCs) and microfinance institutions (MFIs)
- With regard to portfolio level, the maximum headroom permissible for purchase of bonds and CPs (Commercial paper), rated AA/AA-, by PSBs under the Scheme is also extended to 50% from the earlier 25% (i.e. Rs 11,250 crore).
- At the end of six months (by November 19), the portfolio will be crystallised based on the actual amount disbursed for the guarantee to come into effect.
About Partial Credit Guarantee Scheme (PCGS) 2.0:
PCGS 2.0 was launched to provide Portfolio Guarantee for purchase of Bonds or CPs with a rating of AA and AA issued by NBFCs, HFCs and MFIs by Public Sector Banks (PSBs) to provide liquidity infusion of Rs 45,000 crore into the system.
- Under the scheme, the first 20% of the loss is provided to state-owned banks by the government for purchase of bonds or CPs of NBFCs, MFIs and HFCs having a credit rating of AA or below, including unrated paper with original maturity of up to one year.
- It aimed at providing access to fresh liquidity support to non-bank lenders.
The Centre had announced the PCGS in July 2019 but in May 2020 amid COVID 19 finance minister Nirmala Sitharaman had extended the scheme to provide liquidity support to institutions with low credit ratings.
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