RBI To Conduct ₹50,000-cr LTRO

To inject durable liquidity into the banking system and ensure transmission of changes in policy repo rate to bank lending rates, the Reserve Bank of India (RBI), on Friday, announced that it will conduct Long-Term Repo Operations (LTROs) for three years aggregating ₹25,000 crore on February 17 and for one year aggregating ₹25,000 crore on February 24.

The date of reversal for the above mentioned LTROs will be February 16, 2023, and February 23, 2021, respectively.

To augment credit flow to productive sectors and support flagging growth, the RBI unveiled the LTRO facility in its sixth bi-monthly monetary policy review on February 6.

By conducting LTRO of one and three years’ duration at the policy repo rate of 5.15 per cent, the central bank is seeking to ensure that banks can access durable liquidity aggregating up to ₹1-lakh crore at a reasonable cost. With this, the RBI expects its repo rate cuts to translate into lower bank lending rates (better monetary transmission).

As per the operational guidelines for LTROs, the operations conducted under this scheme will be in addition to the existing Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) operations. The total amount of liquidity injected through these operations would be up to ₹1-lakh crore.

The minimum bid amount would be ₹1 crore and in multiples thereof. The allotment would be in multiples of ₹1 crore. There will be no restriction on the maximum amount of bidding by individual bidders. “The operations would be conducted at a fixed rate. Banks would be required to place their requests for the amount sought under LTRO during the window timing at the prevailing policy repo rate. Bids below or above policy rate will be rejected,” the RBI said.

In case of over-subscription of the notified amount, the allotment will be done on pro-rata basis. The RBI will, however, reserve the right to inject marginally higher amount than the notified amount due to rounding effects.

The eligible collateral for LTROs and the applicable haircuts will remain the same as applicable for LAF. All other terms and conditions, as applicable to LAF operations, including facility for security substitution, will also be made applicable to the LTROs, mutatis mutandis (with the respective changes having been considered).