“It has been decided to conduct On tap Targeted Long-term Repo Operations of up to three years tenor for a total amount of up to Rs 1,00,000 crore at a floating rate linked to the policy repo rate,” the central bank said in a release Wednesday evening.
Banks will avail cash under this dedicated plan only to deploy through corporate bonds, commercial papers and non-convertible debentures. Such debt securities will be issued by companies from those five sectors. Liquidity availed under the scheme can also be used to extend loans to those companies.
A section of the market believes, this move may send bond yields of non-triple-A rated companies higher pulling prices down. At the same time, it is expected to raise demand for securitised loan portfolios with yields on those products dropping.
Investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of 25 percent of total investment allowed to be included in the HTM portfolio, the central bank said.
All exposures under this facility will also be exempted from reckoning under the large exposure framework (LEF).
The plan will remain operational between October 22 this and March 31 next year.
Banks eligible under the Liquidity Adjustment Facility (LAF), a daily central bank window, can participate in the TLTRO.
The central bank will release money by initiating a three-year repo contract with any interested bank.
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