Money & Banking

TLTRO scheme: Banks have to provide liquidity to eligible sectors via financial instruments

Our Bureau Mumbai | Updated on October 21, 2020 Published on October 21, 2020

The ‘on-tap’ TLTRO is a good move ahead of the festival season   -  REUTERS

The Reserve Bank of India (RBI) on Wednesday said liquidity availed by banks under the On tap Targeted Long-term Repo Operations (TLTRO) has to be deployed in the financial instruments issued by entities in five specific sectors.

The eligible sectors are: agriculture; agri-infrastructure; secured retail; micro, small and medium enterprises (MSMEs); and drugs, pharmaceuticals and healthcare.

“Liquidity availed by banks under the scheme has to be deployed in corporate bonds, commercial paper 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,” the RBI said.

Liquidity availed under the scheme can also be used to extend loans and advances to these sectors.

The RBI will be conducting On tap Targeted Long-term Repo Operations of up to three years tenor for a total amount of up to ₹1 lakh crore at a floating rate linked to the policy repo rate. The Scheme will remain operational from October 22, 2020 till March 31, 2021.

Investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of 25 per cent of total investment permitted to be included in the HTM portfolio.

All exposures under this facility will also be exempted from reckoning under the large exposure framework (LEF).

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Published on October 21, 2020
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