The Reserve Bank of India (RBI) has decided to bring the 26 stressed sectors identified by the Kamath Committee within the ambit of sectors eligible under on tap Targeted Long-Term Repo Operations (TLTRO), providing more liquidity to the slowdown-hit economy.
Under TLTRO, banks can invest in specific sectors through debt instruments like corporate bonds, commercial papers and non-convertible debentures (NCDs) to push the credit flow in the economy. The central bank had brought five sectors announced under the TLTRO scheme on October 21.
The RBI had announced the TLTRO on Tap scheme on October 9, 2020 which will be available up to March 31, 2021. Accordingly, it was decided to conduct on tap
TLTRO with tenors of up to three years for a total amount of up to Rs 1 lakh crore at a floating rate linked to the policy repo rate with flexibility to enhance the amount and period after a review of the response to the scheme, the RBI said.
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According to State Bank of India Chairman Dinesh Khara, the RBI announcement of the extension of on tap TLTRO to stressed sectors is a perfect example of coordinated monetary and fiscal policy coordination, a hallmark of the current pandemic.
As part of the Aatmanirbhar Bharat Package 3.0 announced on November 12, the Centre launched the Emergency Credit Line Guarantee Scheme 2.0 (ECLGS 2.0) under which the corpus of Rs 3 lakh crore of existing ECLGS 1.0 was extended to provide 100 per cent guaranteed collateral free additional credit to entities in 26 stressed sectors identified by the Kamath panel plus health care sector with credit outstanding of above Rs 50 crore and up to Rs 500 crore as on February 29, 2020.
According to the RBI, banks are encouraged to synergise the two schemes by availing funds from RBI under on tap TLTRO and seek guarantee under ECLGS 2.0 to provide credit support to stressed sectors. Liquidity availed by banks under the scheme should be deployed in corporate bonds, commercial papers, and non-convertible debentures issued by the entities in specific sectors over and above the outstanding level of their investments in such instruments as on September 30, 2020.
Reacting to the MPC decisions, Punjab National Bank MD & CEO CH S S Mallikarjuna Rao said, “The growth is expected to be better with the GDP estimate being revised upwards for FY21. Liquidity measures have been announced to revive activity and on tap TLTRO has been extended to the stressed sectors identified by the Kamath committee. The credit offtake is expected to get a boost going forward, we expect it to top at least 8 per cent in the days to come.”
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