Budget 2020

RBI nudges credit growth, announces Rs 1 lakh crore on-tap TLTRO window

MUMBAI: The Reserve Bank of India (RBI) on Friday took a determined step towards boosting credit growth by announcing a Rs 1 lakh crore long-term repo operations (TLTRO) for banks.

To invest in corporate bonds and other debt instruments of various sectors, lenders will be able to borrow from this window at the policy repo rate. The RBI, which stood pat with the key policy rate at 4 per cent, said its focus on liquidity measures will now include revival of activity in specific sectors that have both backward and forward linkages, and multiplier effects on growth.

“It has been decided to conduct on-tap TLTRO with tenors of up to three years for a total amount of up to Rs 1 lakh crore at a floating rate linked to the policy repo rate,” RBI Governor Shaktikanta Das said as part of his policy announcement.

The scheme will be available up to March 31, 2021 with flexibility of enhancing the amount and period after a review of the response to the scheme, Das added.

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.

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

Moreover, banks that had availed of funds earlier under TLTRO and TLTRO 2.0 have the option of reversing these transactions before maturity.

“In view of the borrowing requirements of the Centre and states in the second half of 2020-21 and the likely pick-up in demand for credit as the recovery gathers strength, on-tap TLTROs are intended to enable banks to conduct their operations smoothly and seamlessly without being hindered by illiquidity frictions,” Das said.