Partial Credit Guarantee Scheme (PCGS) 2.0 

#GS2 #Schemes 

As part of Aatmanirbhar Bharat Abhiyan, announced by the Government, Partial Credit Guarantee Scheme (PCGS) 2.0 was launched in May 2020 to 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). 

Performance of the scheme 

  • It was envisaged to purchase Bonds/CPs of Rs. 45,000 crore under PCGS 2.0 of which the maximum headroom permissible for purchase of Bonds/ CPs rated AA/AA- was 25% of the total portfolio i.e. Rs. 11,250 crore. 
  • Under PCGS 2.0, PSBs have approved purchase of Bonds/ CPs rated AA/AA- issued by 28 entities and Bonds/CPs rated below AA- issued by 62 entities, amounting to Rs. 21,262 crore overall. 

What has been changed? 

  • Keeping in view the progress under the Scheme, the Government has now decided to modify PCGS 2.0 for purchase of Bonds/CPs as under: 
  • Additional 3 months have been granted to build up the portfolio. At the end of six months, i.e. by 19.11.2020, the portfolio shall be crystallised based on actual amount disbursed, for the Guarantee to come into effect. 
  • At the portfolio level, AA and AA- investment sub-portfolio under the Scheme should not exceed 50% (instead of 25% stipulated earlier) of the total portfolio of Bonds/ CPs purchased by PSBs under the Scheme. 
  • It is expected that the above modification will provide greater flexibility to PSBs in purchasing Bonds/CPs under PCGS 2.0. 

About Partial Credit Guarantee Scheme  

  • The Union Cabinet in May 2020 had approved the Sovereign portfolio guarantee up to 20% first loss for purchase of Bonds or Commercial Papers (CPs) with a rating of AA and below (including unrated with original/initial maturity of up to one year) issued with NBFCs/MFCs/Micro Finance Institutions (MFIs) by Public Sector Banks (PSBs) through an extension of the Partial Credit Guarantee Scheme (PCGS). 
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