Business of the Trust
On 13th May 2020, the Honorable Finance Minister announced that the Government will launch Rs 30,000 crore Special Liquidity Scheme, liquidity being provided by RBI. Investment will be made in primary and secondary market transactions in investment grade debt paper of NBFCs, HFCs and MFIs.
On 20th May 2020, the Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval to the proposal of the Ministry of Finance to launch a new Special Liquidity Scheme for Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) to improve liquidity position of the NBFCs/HFCs.
NBFCs mostly rely on funds from the capital market and banks to provide credit to different sections of the society. Due to a multitude of factors, further worsened by the COVID 19 pandemic, most of the NBFCs have found it difficult to access the capital markets and bank to raise required resources. As a result, they have to reduce their lending to different sections. In order to provide liquidity to the NBFCs, the government and RBI had taken several measures including providing liquidity through TLTRO 2.0, partial credit guarantee scheme etc. This special liquidity facility would supplement the liquidity measures taken so far by the Government and RBI. The Scheme would benefit the real economy by augmenting the lending resources of NBFCs/HFCs/MFls.
SLS Trust has been formed to provide liquidity by purchasing short term debt papers of eligible NBFCs/HFCs. RBI would provide liquidity to the Trust depending on the actual purchases by the Trust. The total exposure of the Trust will not exceed Rs. 30,000 crores.
The Sponsor of the Trust is SBI Capital Markets Limited (“SBICAP”), a wholly owned subsidiary of State Bank of India. SBICAP Trustee Company Limited is the trustee of SLS Trust
Apeejay House,6th Floor,
3, Dinshaw Wachha Road,
Churchgate,Mumbai – 400 020
Phone: +91 – 022 - 43025505
firstname.lastname@example.org (For general queries)
email@example.com (For general queries)
firstname.lastname@example.org (For proposal related queries)
The Trust has formed an Investment Committee (IC) to take all investment decisions on behalf of the Trust. The Investment Committee consists of two senior representatives from the State Bank of India (“SBI”), and one representative from SBICAP and SBICAP Ventures Ltd each. The Investment Committee at all times shall have a minimum of 4 members. Investment proposals made on behalf of the Trust are referred to the Investment Committee for a final decision. Investment decisions of the IC are made unanimously. The members of the IC may be changed, substituted or reconstituted by the Trust.
The Trust has also formed an Advisory Committee on Conflict of Interest, which will provide guidance pertaining to identification of conflicts, disclosing conflicts and procedures to be followed to manage conflicts of interest and situations that may result in the appearance of a conflict. The advisory committee consists of one representative (not below the rank of General Manager) each from NABARD, NHB and SIDBI. The number of members in the committee may be increased to 5. Any decision for change in constitution of the Advisory Committee shall be taken by the Trustee in consultation of the Sponsor of the Trust.
- What is the Trust?
- Who is the Sponsor of the Trust?
- What kind of securities will be purchased by the Trust?
- Who are the eligible NBFCs/HFCs?
- 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.
- Securities issued upto 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.
- What is the tenor of investment?
- Will the Trust invest in securities from the secondary market?
- What is the maximum amount of liquidity that the Trust will provide to a single NBFC/HFC?
- What is the interest rate at which investment will be made?
- Who will be financing the funds used to purchase the eligible securities?
- Will there be any collateral required from the NBFCs/ HFCs?
- What purposes are permissible to NBFCs/ HFCs for deploying the proceeds?
- What is the total amount that will be deployed for purchasing of NBFC/HFC bonds?
- I have eligible debt securities I want to sell. Who should I contact to take this forward?
- Can an NBFC/HFC approach the trust to avail the benefit of the scheme through any broker, intermediary or other agencies?
- An NBFC/HFC has been erroneously reported under SMA-1/SMA-2 by one or more of their lenders one year prior to 01-Aug-2018, can they still apply for the scheme?
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.
The Trust is sponsored by SBI Capital Markets Limited, a wholly owned subsidiary of State Bank of India.
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 upto 90 days. These dates may be extended by Government of India. The actual investment decision will be taken by the Investment Committee of the Trust.
The following conditions need to be satisfied by the NBFCs/HFCs for being eligible under the Scheme
The residual tenor of the securities shall not be more than 90 days.
The Trust can invest in securities either from the primary market or secondary market subject to the conditions mentioned in the Scheme.
The amount that can be invested in any NBFC/HFC shall be decided by the investment committee subject to scheme guidelines.
The yield on securities invested by SPV shall be decided by the Investment Committee subject to the provisions of the scheme.
The Trust will have an arrangement with Reserve Bank of India to fund any purchase of securities under the scheme.
The Trust may require an appropriate level of collateral from the NBFCs/ HFCs
The financing would be used by NBFCs/ HFCs only to repay existing liabilities and not to expand assets.
The total outstanding securities purchased by the Trust shall not exceed Rs. 30,000 crores or any amount as per the scheme
You may send your proposals through email at email@example.com
Interested NBFCs/HFCs may approach the Trust directly through email at firstname.lastname@example.org through their official email id. All correspondence would be with the Company directly through their official email ids only. Communication from any other email ids (except official email id of NBFC/HFC) shall not be entertained.
If an NBFC/HFC has been erroneously reported under SMA-1/SMA-2 by one or more of their lenders one year prior to 01-Aug-2018, they can submit a certificate in specific format, signed by an official of the rank not below Deputy General Manager for further processing of their application.