The government has announced Rs.30,000 crore Special Liquidity Scheme (SLS) and Partial Credit Guarantee Scheme (PCGS) of Rs 45,000 crore for non-banking finance companies (NBFCs), housing finance companies (HFCs) and microfinance institutions (MFIs).
Under the SLS, the government will invest in both the primary and secondary market in investment grade debt papers of NBFCs, HFCs and MFIs. These securities will be fully guaranteed by the government.
In PCGS, the government aims to cover primary market issuance of bonds of NBFCs, HFCs and MFIs with low credit rating. Papers with rating of AA and below including unrated papers will be eligible for investment and the government will bear the first 20% of the loss.
Fund managers feel that these measures will somewhat improve the sentiment in the corporate bond market. Nevertheless, they await more details and measures that would make the corporate bond space liquid.
Mahendra Jajoo, Head-Fixed Income, Mirae Asset MF feels that these measures will definitely bring some confidence to the market. He said that the amount does not worry him as the government could step in further if required.
Lakshmi Iyer, CIO (Debt) & Head of Products, Kotak MF said that market participants were awaiting some relief on NBFCs and hence these measures are positive. There were hardly any buyers for some of the lower rated NBFCs. Now, at least some banks and financial institutions will be looking to lend or at least trade these papers in the market.
Dwijendra Srivastava, CIO – Debt, Sundaram MF feels that liquidity in the market will allow debt funds to offload their low credit papers. He added that currently there is not significant redemption pressure as was the case a week ago.
However, some fund managers are a bit more cautious at this point.
Pankaj Pathak, Fund Manager - Fixed Income, Quantum MF feels that while today’s announcements will be helpful in improving liquidity of corporate bonds, one needs to wait for more details. He feels that only after looking at the finer details of these measures, one can decide to what extent these measures will be helpful.
