Reserve Bank of India Governor Shaktikanta Das on Friday, in his second media briefing within a month, announced TLTRO 2.0 of Rs 50,000 crore to ensure that small and mid-sized corporates, including non-banking financial companies (NBFCs) and micro finance institutions (MFIs) get enough liquidity.
"The RBI will conduct targeted long-term repo operations (TLTRO 2.0) for an aggregate amount of Rs 50,000 crore, "to begin with", in tranches of appropriate sizes," said RBI Governor Shaktikanta Das while addressing the media on Friday.
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, said RBI chief.
These investments have to be made within one month of the availability of liquidity from the RBI, Das added.
"As in the case of TLTRO auctions conducted previously, 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," he said.
Exposures under this facility will also not be reckoned under the large exposure framework, he added.
The move came after the RBI observed that the deployment of TLTRO funds so far has largely been to bonds issued by public sector entities and large corporates, especially in primary issuances. The disruptions caused by COVID-19 have, however, more severely impacted small and mid-sized corporates in terms of access to liquidity.
"The initial efforts to provide adequate system level liquidity are reflected in the sizeable net absorptions under reverse repo operations. With this achieved, the RBI has undertaken measures to target liquidity provision to sectors and entities which are experiencing liquidity constraints and/or hindrances to market access," Das said.
In the last policy meeting on March 27, the central bank had introduced the TLTROs to enhance liquidity in the system, especially the corporate bond market. The central bank had announced to lend as much as Rs 1 lakh crore under TLTRO of up to three-year tenor, at a floating rate linked to the policy repo rate, to averse the large sell-offs in the domestic equity, bond and forex markets caused by the coronavirus crisis. So far, Rs 75,000 crore of TLTROs operations have been conducted in three tranches and the central bank is scheduled to conduct another TLTRO operation for Rs 25,000 crore on April 17.