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RBI’s liquidity boost: Here’s who benefits from TLTRO 2.0

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RBI’s liquidity boost: Here’s who benefits from TLTRO 2.0

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The Reserve Bank of India has issued detailed guidelines on how funds availed under the second round of Targeted Long Term Repo Operations (TLTRO 2.0) announced on Friday will be deployed.

The Reserve Bank of India has issued detailed guidelines on how funds availed under the second round of Targeted Long Term Repo Operations (TLTRO 2.0) announced on Friday will be deployed.

“In order to channel liquidity to small and mid-sized corporates, including non-banking financial companies (NBFCs) and microfinance institutions (MFIs), that have been impacted by COVID-19 disruptions, it has been decided to conduct Targeted Long-Term Repo Operations (TLTRO) 2.0 at the policy repo rate for tenors up to three years for a total amount of up to ₹50,000 crores, to begin with, in tranches of appropriate sizes,” RBI said.
At least 50 percent of the total funds availed under TLTRO have to be apportioned as given below:
(a) 10 percent in securities/instruments issued by Micro Finance Institutions (MFIs)
(b) 15 percent in securities/instruments issued by NBFCs with asset size of Rs 500 crore and below
(c) 25 percent in securities/instruments issued by NBFCs with assets size between Rs 500 crore and Rs 5,000 crore
Explained:
RBI has said any investments made under this facility will be classified as held to maturity (HTM) even in excess of 25 percent of total investment permitted to be included in the HTM portfolio. Exposures under this facility will not be reckoned under the Large Exposure Framework (LEF).
The first auction under TLTRO 2.0 will be conducted on April 23, 2020.
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