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PARTIAL CREDIT GUARANTEE SCHEME (PCGS) 2.0

Focus: GS-III Indian Economy

Why in news?

Partial Credit Guarantee Scheme (PCGS) 2.0 is extended with greater flexibility to respond to emerging demands.

Partial Credit Guarantee Scheme (PCGS) 2.0

  • As part of Aatmanirbhar Bharat Abhiyan, announced by the Government, Partial Credit Guarantee Scheme (PCGS) 2.0 was launched.
  • Under the scheme, provide Portfolio Guarantee for purchase of Bonds or Commercial Papers (CPs) with a rating of AA and below issued by NBFCs/HFCs/ MFIs by Public Sector Banks (PSBs) i.e., Under the scheme – any PSB can purchase securities (minimum rating of ‘AA’) of financially-sound non-banking finance companies.
  • The objective is to address temporary asset-liability mismatches of otherwise solvent NBFCs/Housing finance companies (HFCs) without having to resort to distress sale of their assets to meet their commitments.
  • The government will provide a one-time, six months’ partial credit guarantee to public sector banks for first loss of up to 10%.
  • Also, these NBFCs/HFCs are mandated that the CRAR (Capital to Risk-Weighted Assets Ratio) shall not go below the regulatory minimum while exercising of the option to buy back the assets.
February 2023
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