RBI has decided to conduct On tap Targeted Long-term Repo Operations of up to three years tenor for a total of up to Rs.1,00,000 crore at a floating rate linked to the policy repo rate.
Liquidity availed by banks under the scheme has to be deployed in corporate bonds, commercial paper 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. Liquidity availed under the scheme can also be used to extend loans and advances to these sectors.
Investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of 25 per cent of total investment permitted to be included in the HTM portfolio. All exposures under this facility will also be exempted from reckoning under the large exposure framework (LEF).
Agriculture, agri-infrastructure, secured retail, micro, small and medium enterprises, drugs, pharmaceuticals and healthcare are the eligible sectors for this scheme. The scheme will remain operational from October 22 till March 31, 2021. All banks eligible under the Liquidity Adjustment Facility (LAF) can participate in the scheme.
RBI will aggregate all requests received from banks and release funds every Monday (on the subsequent working day if Monday is a holiday) by initiating a 3-year repo contract with the requesting bank.
If a bank places multiple requests during the week, all such requests will be aggregated, and a single repo contract will be created on the date of operation.
In case the requested amount exceeds the remaining amount under the scheme on the date of operation, the remaining amount will be distributed on a pro-rata basis among all the eligible requests, according to an RBI release.