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The Reserve Bank of India (RBI) will provide banks one more option to prepay the outstanding amount of funds availed under the Targeted Long-Term Repo Operations (TLTRO 1.0 and 2.0).
Liquidity availed under the scheme by banks under TLTRO 1.0 (announced on March 27, 2020) had to be deployed in investment grade corporate bonds, commercial paper, and non-convertible debentures over and above the outstanding level of their investments in these bonds as on March 27, 2020.
Funds availed by banks under TLTRO 2.0 (announced on April 17, 2020) were required to be invested in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs, with at least 50 per cent of the total amount availed going to small and mid-sized NBFCs and MFIs.
RBI Governor Shaktikanta Das noted that banks have already prepaid ₹37,348 crore in November 2020, which constituted about one-third of ₹1,12,900 crore availed under the TLTRO scheme.
Das said the on-tap liquidity windows of ₹50,000 crore for ramping up Covid-related healthcare infrastructure and services and ₹15,000 crore for certain contact-intensive sectors will continue till their terminal date – March 31, 2022.
MSF window
Given that the usage of the Marginal Standing Facility (MSF) window has been rare due to surplus liquidity conditions, the RBI plans to return to the normal dispensation under the MSF.
Consequently, banks will be able to dip up to 2 per cent of net demand and time liabilities (NDTL), instead of 3 per cent, for overnight borrowing under the MSF from January 1. Currently, banks can avail funds under MSF at 4.25 per cent interest rate.
Das observed that this dispensation, which was provided at the beginning of the pandemic, had boosted market confidence at a crucial time.
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