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India rolls out additional measures to improve liquidity for nonbank lenders

India's government and central bank rolled out additional measures to improve liquidity for nonbanking financial companies, or NBFCs.

In addition to the increased limit of bank loans to NBFCs for on-lending to agriculture, micro and small enterprises and housing sectors announced Aug. 7, the Reserve Bank of India said Aug. 13 banks can allocate up to 5% of their total loans to borrowers from the so-called priority sectors which include the above three sectors.

The new rules will remain valid until the end of March in 2020, the central bank said.

Meanwhile, the Ministry of Finance said the government will provide partial credit guarantee of 1 trillion rupees to public-sector banks to purchase pooled assets of financially sound NBFCs. The guarantee will last for six months or until the banks use up the guarantee.

The government said it hoped the scheme to address temporary liability mismatches of otherwise solvent NBFCs or housing finance companies without forcing them to sell assets to meet their financial obligations.

As of Aug. 13, US$1 was equivalent to 70.93 Indian rupees.