Reserve Bank announces fourth tranche of Rs 25,000-cr long-term repo operation on 17 April

In a bid to provide additional liquidity to the system hit by the coronavirus outbreak, the Reserve Bank of India (RBI) on Wednesday announced the fourth tranche of targeted long term repo operation (TLTRO) of Rs 25,000 crore for a three-year tenor.

“So far, TLTROs for Rs 75,000 crore have been conducted in three tranches. It has now been decided to conduct the next TLTRO operation for Rs 25,000 crore”, RBI said in a statement.

The funds availed under this tranche of TLTRO would have to be deployed within 30 working days from the date of the operation, RBI said.

The maximum amount that a particular bank can invest in the securities issued by a particular entity or group of entities out of the allotment received by it under the TLTRO shall be capped at 10 percent, it said.

The TLTRO as an instrument was introduced on 27 March by the RBI along with the policy rate (repo rate) cut of 0.75 percent in order to encourage financial institutions to lend more.

A slew of incentives were also announced to encourage the same.

The total size of the TLTRO has been fixed at Rs 1 lakh crore.

The RBI conducted the first tranche of TLTRO on 27 March, second tranche on 3 April and third tranche on 9 April.

The banks have to deploy the money in well-rated corporate bonds and have been incentivised by making it possible to recognise such investments in the held to maturity rather than mark to market, which makes a bank’s earnings exposed to market volatilities.