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RBI Monetary Policy: Central bank to conduct on-tap TLTRO worth Rs 1 lakh crore

RBI Monetary Policy: Central bank to conduct on-tap TLTRO worth Rs 1 lakh crore

RBI Monetary Policy: Central bank to conduct on-tap TLTRO worth Rs 1 lakh crore
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By Mousumi Paul  Oct 9, 2020 11:17:43 AM IST (Published)

The Reserve Bank of India in its liquidity measures announced that it will conduct on-tap TLTRO (Targeted Long-Term Repo Operations) worth Rs 1 lakh crore for up to three years.

The Reserve Bank of India in its liquidity measures announced that it will conduct on-tap TLTRO (Targeted Long-Term Repo Operations) worth Rs 1 lakh crore for up to three years. This will be done at a floating rate linked to the repo rate and will be available until March 2021.

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The TLTRO scheme will be reviewed on the basis of the response received. The liquidity availed from this scheme will be used to extend bank loans towards sectors that need growth.
Under TLTRO scheme, the RBI makes banks opt for funds so that they can invest the money in investment-grade corporate debt. NBFCs and corporate firms then issue new bonds funded by banks using the TLTRO money, which helps these firms to pay back their existing bond obligations.
"The focus of liquidity measures by the RBI will now include revival of activity in specific sectors that have both backward and forward linkages, and multiplier effects on growth," explained Das.
The RBI decided to keep the benchmark interest rate unchanged at 4 percent for the second time in a row and continued to maintain an accommodative stance.
The repo rate has been left unchanged at 4 percent while the reverse repo rate has been maintained at 3.35 percent. The MPC voted unanimously to keep policy rates unchanged.
To further improve the liquidity in the system, the central bank also announced to increase the size of weekly OMO purchases to Rs 20,000 crore.
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