The Indian government has set into motion the implementation of several schemes that are aimed at improving both the liability and asset sides of the balance sheets of banks and non-banking financial companies (NBFCs), so that lending to the real economy can increase. The most recently introduced are four schemes. The first guarantees 100% of fresh loans to existing micro, small and medium enterprises (MSME) borrowers up to a total of ₹3 trillion. The second guarantees 10% of existing eligible loans of NBFCs or housing finance companies (HFCs) originated before the lockdown and purchased by banks. Both these are for ticket sizes up to ₹5 crore. The third guarantees 100% of fresh and existing investment-grade paper of NBFCs up to ₹30,000 crore through direct purchases by the Reserve Bank of India (RBI). The fourth guarantees 20% of public sector banks’ purchases of fresh issuances of lower or unrated debt of NBFCs/HFCs, including micro finance Institutions, in the next three months.
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