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The Reserve Bank of India on Friday said on-tap targeted long term repo operations (TLTRO) will be expanded to cover other stressed sectors in synergy with the credit guarantee available under the Emergency Credit Line Guarantee Scheme (ECLGS 2.0) of the Government. This is aimed at encouraging banks to extend credit support to stressed sectors at lower cost.
Under the on-tap TLTRO announced on October 9, the central bank decided to conduct on-tap TLTRO with tenors of up to three years for a total amount of up to ₹1 lakh crore at a floating rate linked to the policy repo rate.
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The scheme will be available up to March 31, 2021 with flexibility with regard to enhancement of the amount and period after a review of the response to the scheme.
Liquidity availed by banks under the scheme has to be deployed in corporate bonds, commercial papers, and non-convertible debentures issued by the entities in specific sectors over and above the outstanding level of their investments in such instruments as on September 30, 2020.
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While there is near consensus on the RBI leaving the repo rate at 4%, all eyes are on the central bank’s stance on excess liquidityThe liquidity availed under the scheme can also be used to extend bank loans and advances to these sectors.
Investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of the 25 per cent of total investment permitted to be included in the HTM portfolio. All exposures under this facility will also be exempted from the reckoning under the large exposure framework (LEF).
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