Targeted long-term repo operations (TLTRO) By RBI
RBI is going to impose penalty of 200 bps on banks if failed to invest TLTRO funds in 30 days
What is Targeted long-term repo operations?
- It is a tool under which the central bank provides one-year to three-year money to banks at the prevailing repo rate.
- This stimulates bank lending which leads to efficient liquidity in the economy.
About Reserve Bank of India (RBI):
- Headquarters– Mumbai, Maharashtra
- Formation– 1 April 1935
- Governor– Shaktikanta Das
- Deputy Governors– 4 (Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, one is yet to be appointed).
Who instructed to the banks?
- The Reserve Bank of India (RBI)
What is the instruction?
- They need to invest the mandated 50% of the funds raised through targeted long-term repo operations (TLTRO) route, under the first tranche conducted on March 27, 2020,in corporate bonds or specified securities within a month or 30 working days.
- The deployment of funds availed under TLTRO in the primary market cannot exceed 50% of the amount availed.
What happens if banks not follows RBI instructions?
- RBI to slap 200 bps penal interest If failed, the interest rate on un-deployed funds will increase to prevailing policy repo rate plus 200 bps (basis points) additional penal interests will have to be paid for the number of days such funds remain un-deployed.
What is the present policy rate?