The Monetary Board of the Central Bank has decided to establish a new guarantee scheme in respect of loan facilities provided by banking institutions to Registered Finance Companies (RFCs) and Specialized Leasing Companies (SLCs), in instances where RFCs and SLCs face unforeseen liquidity constraints.

In providing these guarantees, the Central Bank will assess the need for such guarantees for the applicant RFC or SLC and the quality of assets mortgaged or assigned in respect of obtaining a loan facility. The Central Bank will also adopt expeditious procedures and impose certain conditions in respect of providing guarantee facilities under this arrangement.

Some RFCs and SLCs have been facing liquidity constraints since early 2009 due to a decline in inflow of new funds and the reluctance of some banking institutions to provide loan facilities to those companies. As a result of this new scheme, such RFCs and SLCs will now be able to obtain loan facilities from banking institutions against their assets to enhance their liquidity position and to conduct their normal business operations.

The guaranteeing of bank loans by the Central Bank will benefit banking institutions too as they could extend their facilities at a lower credit risk and as it will enable them to diversify their portfolios.

The Central Bank expects that this scheme will enhance inflow of funds to vulnerable RFCs and SLCs and relieve the liquidity constraints within a short period of time thereby enabling them to carry on their normal businesses and to contribute to the economic growth in the country.