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NBFCs to get funds under on tap TLTRO scheme for incremental lending: RBI

RBI to increase liquidity in the system, encourage banks to lend more

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The Reserve Bank of India (RBI) on Friday proposed to provide funds to non-banking finance companies (NBFCs) from banks under the 'on tap' TLTRO scheme for incremental lending to some stressed sectors.

In October last year, RBI had announced on tap targeted long term repo operations (TLTRO) scheme for banks. It had said the on tap TLTRO will be conducted 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 repo rate. The scheme is available till March 31, 2021.

"NBFCs are well recognised conduits in reaching out to the last mile in various sectors, it is now proposed to provide funds from banks under the TLTRO on tap scheme to NBFCs for incremental lending to the specified stressed sectors," RBI Governor Shaktikanta Das said during the monetary policy announcement.

In addition to the five sectors announced under the scheme on October 21, 2020, 26 stressed sectors identified by the Kamath Committee were also brought within the ambit of sectors eligible under the on tap TLTRO on December 4, 2020, RBI said.

The initial five eligible sectors for deployment of funds were agriculture, agri-infrastructure, secured retail, MSMEs, drugs, pharmaceuticals and healthcare.

The 26 stressed sectors identified by the Kamath Committee include power, construction, roads chemicals, gems and jewellery, hotels, restaurants, tourism and auto components, among others.

RBI said liquidity availed by banks under the scheme is to be deployed in corporate bonds, commercial paper and non-convertible debentures issued by entities in these sectors.

The liquidity availed under the scheme can also be used to extend bank loans and advances to these sectors.

Investments made by banks under this facility can be classified as held to maturity (HTM) even above the 25 per cent of total investment permitted to be included in the HTM portfolio, it said.

The central bank said all exposures under this facility are exempted from reckoning under the large exposure framework (LEF).

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