By Kosaku Narioka

The Indian government approved a program to improve the liquidity of non-bank financial companies and housing-finance companies to avoid any potential systemic risks to the financial sector, the country's central bank said Wednesday.

Reserve Bank of India said that a special-purpose vehicle, set up by a State Bank of India unit, would buy short-term papers from eligible financial companies, and they could only use the proceeds to pay off existing liabilities.

Reserve Bank of India said the commercial papers or debt securities should have remaining maturity of no more than three months and be rated as investment grade, while the special-purpose vehicle would stop making new purchases after Sept. 30 and recover all funds by Dec. 31. 



  Write to Kosaku Narioka at kosaku.narioka@wsj.com