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SBI Cap issues FAQ for Rs 30,000 cr Special Liquidity Scheme Trust

SBI Cap issues FAQ for Rs 30,000 cr Special Liquidity Scheme Trust

SBI Cap issues FAQ for Rs 30,000 cr Special Liquidity Scheme Trust
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By Ritu Singh  Jul 2, 2020 8:59:38 AM IST (Published)

The Special Liquidity Scheme (SLS) Trust to rescue non-bank lenders announced under the Atmanirbhar Bharat Abhiyan relief package came into effect on July 1.

The Special Liquidity Scheme (SLS) Trust to rescue non-bank lenders announced under the Atmanirbhar Bharat Abhiyan relief package came into effect on July 1. The trust will be managed by State Bank of India's subsidiary SBI Capital Markets which will purchase short-term papers from eligible NBFCs and HFCs and provide them liquidity.

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Reproduced below is a set of FAQs or Frequently Asked Questions published by SBI Cap on how the SLS Trust would function.
What is SLS Trust?
The Trust has been set up under the Indian Trusts Act 1882. It was formed with the objective of managing the Stressed Asset Fund (SAF) announced by the Government of India under the Special Liquidity Scheme for NBFCs/HFIs. Under the Scheme, the Trust will purchase eligible debt securities to improve liquidity in the NBFC/HFC sector.
Who is the sponsor of the trust?
The Trust is sponsored by SBI Capital Markets Limited, a wholly-owned subsidiary of State Bank of India.
What kind of securities will be purchased by the trust?
The Trust will invest in Commercial Papers (CP) and Non-Convertible Debentures (NCDs) of eligible NBFCs/HFCs during the period of 3 months starting from the date of operationalization of the Trust and with a residual maturity of up to 90 days. These dates may be extended by the Government of India. The actual investment decision will be taken by the Investment Committee of the Trust.
Who are the eligible NBFCs/HFCs?
The following conditions need to be satisfied by the NBFCs/HFCs for being eligible under the Scheme:
The NBFC including Microfinance institutions registered with RBI under the Reserve Bank of India Act, 1934, excluding those registered as Core Investment Companies.
HFCs registered with National Housing Bank (NHB) under the National Housing Bank Act, 1987.
The CRAR of NBFCs/CAR of HFCs should not be below the regulatory minimum (i.e. 15% for NBFCs and 12% for HFCs) as on 31.03.2019..
Their Net Non-Performing Asset should not be more than 6% as on 31.03.2019.
They should have made a net profit in at least one of the two preceding financial years (i.e. 2017-18 and 2018-19).
The NBFCs/HFCs should not have been reported as SMA-1 or SMA-2 category by any bank for their borrowing during last one year prior to 1.8.2018.
The NBFCs/HFCs should be rated investment grade by a rating agency.
The SPV may require an appropriate level of collateral from the NBFCs/HFCs which, however, would be optional and to be decided by the SPV.
In addition to the above, the following are the eligible securities for investment by SLS Trust:
Securities issued up to September 30, 2020 will only be eligible under the Scheme. Purchase of these securities must be done by September 30, 2020 and repayment may be ensured by December 31, 2020. These timelines may be modified by the Government. Securities should be standard in the books of the sellers as on date of sale and there should not be any default on that date.
Such securities should have a minimum investment rating of investment grade or equivalent.
Please note that mere fulfilling the above criteria would not mean that the Trust will invest in these securities. The investment decisions will be taken by the Investment Committee and may include a number of evaluation criteria. The decision of the Investment Committee shall be final.
What is the tenor of investment?
The residual tenor of the securities shall not be more than 90 days.
Will the trust invest in securities from the secondary market?
The Trust can invest in securities either from the primary market or secondary market subject to the conditions mentioned in the Scheme.
What is the maximum amount of liquidity that the trust will provide to a single NBFC/HFC?
The amount that can be invested in any NBFC/HFC shall be decided by the Investment Committee subject to scheme guidelines.
What is the interest rate at which investment will be made?
The yield on securities invested by SPV shall be decided by the Investment Committee subject to the provisions of the scheme.
Who will be financing the funds used to purchase the eligible securities?
The Trust will have an arrangement with Reserve Bank of India to fund any purchase of securities under the scheme.
Will there be any collateral required from the NBFCs/ HFCs?
The Trust may require an appropriate level of collateral from the NBFCs/ HFCs.
What purposes are permissible to NBFCs/ HFCs for deploying the proceeds?
The financing would be used by NBFCs/ HFCs only to repay existing liabilities and not to expand assets.
What is the total amount that will be deployed for purchasing of NBFC/HFC bonds?
The total outstanding securities purchased by the Trust shall not exceed Rs. 30,000 crores or any amount as per the scheme.
I have eligible debt securities, I want to sell. Who should I contact to take this forward?
You may send your proposals through email at proposals@slstrust.in
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