Government Extended the Partial Credit Guarantee Scheme (PCGS) 2.0

Published on Friday, August 21, 2020
  • Launched Date: 20th May 2020
  • Launched by: Union finance minister Nirmala Sitharaman

Partial credit guarantee scheme 2.0 :

  • This scheme worth 45000cr and was launched under the Aatmanirbhar Bharat economic package of Rs 20.97 lakh crore, under which public sector banks have approved the purchase of bonds, commercial papers (CPs) with a rating of AA and AA- investment sub-portfolio issued by NBFCs, HFCs, and MFIs.
  • Under this scheme, the government will provide 20 percent first loss sovereign guarantee to PSBs for the purchase of bonds or commercial papers with a rating of AA and below issued by NBFCs/HFCs or MFIs.
  • Aim: To provide liquidity support to institutions with low credit ratings. 

Key Points:

  • The scheme has been extended by three months i.e. till 11th November 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).
  • In addition, the government had announced the Special Liquidity Scheme worth Rs. 7,464 crore to purchase Commercial Papers (CPs) and non-convertible debentures (NCDs) issued by NBFCs/HFCs with a residual maturity of up to three months, not exceeding worth ₹30,000 crores.
  • Now, at the portfolio level, AA and AA- investment sub-portfolio under the Scheme should not exceed 50 percent, which was earlier at 25 percent of the total portfolio of Bonds/ CPs purchased by PSBs.

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