The Reserve Bank of India earlier introduced the Targeted Long Term Repo Operations as a tool to enhance liquidity in the system, particularly the corporate bond market, in the wake of the COVID-19 crisis.
The RBI has clarified certain frequently asked questions on TLTRO, in which the RBI has clarified that the Banks will have to maintain the amount of specified securities for the amount received in TLTRO in its HTM book at all times until the maturity of TLTRO.
Further there is no maturity restriction on the specified securities to be acquired under the TLTRO scheme. However, the outstanding amount of specified securities in the bank’s HTM portfolio should not fall below the level of amount availed under the TLTRO scheme.
In a FAQ on TLTRO, the central bank said lenders have already been given sufficient time to deploy funds under the scheme. Banks who have raised funds from the auction carried out on March 27 must deploy them within 30 working days.
If a bank fails to deploy funds within the specified time frame, the interest rate on unutilized funds will increase to the prevailing policy repo rate plus 200 basis points for the number of days such funds are not deployed. This incremental interest will have to be paid along with regular interest at the time of maturity.
Click here to read the Notification.
