New Delhi: Niti Aayog Vice Chairman Rajiv Kumar hasdescribed the current economic slowdown as an "unprecedented situationthat India has not faced in last 70 years". His comments have come at atime when the country's economy is facing the worst pace of growth in nearlyfive years.

"From last 70 years, government of India has not facedthis sort of liquidity situation where entire financial sector is in churn andnobody is trusting anybody else," news agency ANI quoted Kumar as sayingon Thursday.He further said that the government is considering a number ofmeasures which will be taken at an appropriate time to deal with financialstress and unleash animal spirit in the economy. Both the government and theRBI have taken a series of measures to deal with stress in the financial sectortriggered by default in the group companies of IL&FS.In a bid to improveliquidity, Kumar said the central bank has taken various steps in the past fewmonths as a result of which the cash position in the system has stabilised. Hefurther said public sector banks have provided liquidity to non-banking financecompanies (NBFCs).He said the RBI has reduced repo rate four consecutive timesthis year and also directed the banks to pass rate cut benefits to borrowers.Kumar further said that the government has taken a series of measures toimprove the financial health of the NBFC sector. The government permittedpublic sector banks to purchase high-rated pooled assets of financially soundNBFCs.

For this, the government provided one-time six months'partial credit guarantee to PSBs for first loss of up to 10 per cent. Earlierthis month, the Centre issued guidelines on operationalising Rs 1-lakh crorepartial guarantee scheme under which public-sector banks can purchasehigh-rated pooled assets of financially sound non-banking finance companies(NBFCs).The partial guarantee would help rework the Asset Liability structurewithin three months to have positive Asset Liability Management in each bucketfor the first three months and on cumulative basis for the remaining period.

As per the guidelines issued, the window for one-timepartial credit guarantee will be for a period of six months, or till such dateby which Rs 1 lakh crore assets get purchased by banks.

Assets originated up to March 31, 2019 will only be eligibleunder this scheme, it said, adding assets should be standard in the books ofNBFCs/HFCs on the date of sale.Among others the government also allow NBFCs toraise funds in public issues, and the requirement of creating a debentureredemption reserve (DRR), which is currently applicable for only public issuesas private placements are exempt, will be done away with.

As of now, NBFCs that do public placement of debt have tomaintain a DRR and in addition, a special reserve as required by the RBI hasalso to be maintained. In a bid to improve regulatory oversight, the governmentalso proposed to bring housing finance companies under the RBI from the fold ofNational Housing Bank. All these steps are aimed at improving the condition ofthe NBFC sector as a whole, Kumar said.