With an aim to deal with the impact of the COVID-19 pandemic, the Reserve Bank of India (RBI) has unveiled further measures to maintain adequate liquidity in the system. RBI has decided to reduce the fixed rate reverse repo rate under the liquidity adjustment facility (LAF) by 25 basis points (bps) from 4.0 per cent to 3.75 per cent with immediate effect. The policy repo rate remains unchanged at 4.40 per cent, and the marginal standing facility rate and the Bank Rate remain unchanged at 4.65 per cent.
The Reserve Bank of India Governor Shaktikanta Das said that it has been decided to conduct targeted long-term repo operations (TLTRO 2.0) for an aggregate amount of Rs 50,000 crore, to begin with, in tranches of appropriate sizes. The funds availed by banks under TLTRO 2.0 should be invested in investment grade bonds, commercial paper, and non-convertible debentures of NBFCs, with at least 50 per cent of the total amount availed going to small and mid-sized NBFCs and MFIs.
RBI also announced special refinance facilities for a total amount of Rs 50,000 crore to the National Bank for Agriculture and Rural Development (NABARD), the Small Industries Development Bank of India (SIDBI) and National Housing Bank (NHB) to enable them to meet sectoral credit needs. This will comprise Rs 25,000 crore to NABARD for refinancing regional rural banks, cooperative banks and MFIs; Rs 15,000 crore to SIDBI for on-lending/refinancing; and Rs 10,000 crore to NHB for supporting housing finance companies