In financial parlance, a TLTRO is a loan scheme for banks which come at the current repo rate from the RBI. This type of operation is generally conducted to relieve the banks from some of their debt repayment obligations towards bond holders. Thus, it boosts cash flows emanating from the banking sector.
Announcing the slew of measures to contain the economic fallout of COVID-19, via online channels, RBI Governor Shaktikanta Das said: “… It has been decided to conduct targeted long-term repo operations (TLTRO 2.0) for a n aggregate amount of Rs 50,000 crore, to begin with, in tranches of appropriate sizes.”
“The funds availed by banks under TLTRO 2.0 should 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.”
Besides, the Governor said that these investments have to be made within one month of the availment of liquidity from the RBI.
“As in the case of TLTRO auctions conducted hitherto, 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,” Das said.
“Exposures under this facility will also not be reckoned under the l arge exposure framework. Notification for the first TLTRO 2.0 auction will b e issued today.”
On Wednesday, the apex bank had said that so far, TLTROs for Rs 75,000 crore have been conducted in three tranches.
The apex bank on Friday conducted the another TLTRO operation for Rs 25,000 crore.
Earlier, the Reserve Bank Governor had said that a fresh TLTRO will be conducted via which Rs 1 lakh crore would be injected through multiple tranches.
Market watchers have contended that such a move will have a durable impact on dealing with the economic fallout of the coronavirus.
