The Finance Ministry’s move on Monday to extend and modify the Partial Credit Guarantee Scheme (PCGS) 2.0 is most beneficial for non-banking finance companies (NBFCs), says John Muthoot, Managing Director, Muthoot Fincorp, leading Kerala-based NBFC, and Chairman of the diversified Muthoot Pappachan Group.
Under the PCGS 2.0, the government provides 20 per cent first loss sovereign guarantee to public sector banks for purchase of bonds or commercial papers with a rating of AA and below (including unrated paper) issued by NBFCs/HFC (housing finance companies) or MFIs (micro-finance institutions). A first-loss default guarantee makes the provider of the guarantee liable to bear losses up to the specified limit.
“The Government of India and Reserve Bank of India (RBI) have introduced timely and relevant relief measures to ease the liquidity of NBFCs to help them meet their maturing liabilities and to place adequate liquidity for lending to restart the economy,” John Muthoot said.
Under the RBI’s Targeted Long-Term Repo Operations (TLTRO) 2.0 scheme, at least 50 per cent of the total funds availed by banks under the scheme have to be deployed in specified securities issued by small NBFCs with asset size of ₹500 crore and below; those by mid-sized NBFCs of asset size between ₹500 crore and ₹5,000 crore; and those by MFIs.
During the last four months, Muthoot Fincorp has received ₹1,475 crore from banks under the Partial Credit Guarantee Scheme 2.0 and TLTRO 2.0 scheme, John Muthoot said. Muthoot Fincorp has come out with new variants of gold loan schemes during this period to cater to its different segments of customers.
New gold loan variants available
Prominent among these are Ashwas Dinam gold loan for nano and micro enterprises; Student Support EMI Gold Loan for purchase of laptops facilitating online education of children; and Restart India Pradhan Gold Loan for supporting MSMEs.
The company has disbursed ₹11,500 crore to 2.5 million customers in the last four months of the current financial year, out of which 75 per cent are MSMEs, including the nano and micro retailers. A large portion of these customers belong to the rural and semi-urban pockets of the country.
#RestartIndia initiative launched
Muthoot Fincorp has, in association with INK Talks, also started the #RestartIndia initiative for the benefit of small businesses. According to John Muthoot, the MSME sector, especially the nano retailers, which has provided the lifeline to the economy during the Covid-19, is taking time to adapt and embrace the new normal.
The focus of #RestartIndia is on giving the right kind of advice to small businesses in order to get them back on track. The core of the initiative currently is available at www.restartindia.in through which anyone can post questions and seek clarification/guidance with respect to running their small businesses.