The <keyword id="6354335" type="ORGANIZATION" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (<keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword>) on Friday said it will conduct on-tap targeted long-term repo operations (TLTRO) for an amount of Rs 1 lakh crore to ensure comfortable liquidity conditions in the system. "It has been decided to conduct on-tap TLTRO with tenors of up to three years for a total amount of up to Rs 1,00,000 crore at a floating rate linked to the policy repo rate," <keyword id="64190" type="POSITION" weightage="20" keywordseo="RBI-Governor">RBI Governor</keyword> <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword> said while announcing the decisions taken by the central bank's Monetary Policy Committee (MPC). Liquidity availed by banks under the scheme has to be deployed in corporate bonds, commercial papers, and non-convertible debentures issued by entities in specific sectors over and above the outstanding level of their investments in such instruments as on September 30, 2020, RBI said. The scheme will be available up to March 31, 2021, with flexibility with regard to enhancement of the amount and period after a review of the response to the scheme. In its bi-monthly monetary policy review, RBI kept the policy rate unchanged at 4 per cent and decided to continue with the accommodative stance. SEE ALSO: <a href="https://www.businessinsider.in/policy/economy/news/rbis-mpc-keeps-the-policy-rates-unchanged-to-maintain-accommodative-stance-for-inflation/articleshow/78566955.cms">RBI says it has decided to 'look through' the current 'high inflation' as it won’t last long⁠ but leaves interest rates unchanged</a> <a href="https://www.businessinsider.in/business/corporates/news/tcs-beats-accenture-to-become-the-worlds-most-valuable-it-services-company/articleshow/78566487.cms">TCS beats Accenture to become the world’s most valuable IT services company — but this not the first time it has raced ahead</a> <a href="https://www.businessinsider.in/india/news/union-minister-ram-vilas-paswan-dies-at-74/articleshow/78558640.cms">India's consumer affairs minister Ram Vilas Paswan passes way at 74</a> <a href="https://www.businessinsider.in/science/space/news/mars-will-appear-bigger-redder-and-brighter-on-october-13-and-wont-get-this-close-to-earth-again-until-2035/articleshow/78556539.cms">Mars will appear bigger, redder, and brighter on October 13 — and won’t get this close to Earth again until 2035</a>

RBI to conduct on-tap TLTRO worth ₹1 lakh crore

<keyword id="6354335" type="COMPANY" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (RBI) on Wednesday said it is putting in place a secondary market <keyword id="122724" type="ORGANIZATION" weightage="20" keywordseo="government-securities">government securities</keyword> acquisition programme or G-SAP 1.0 for this financial to enable an orderly evolution of the yield curve. RBI said the endeavour through the programme will be to ensure congenial financial conditions for the recovery to gain traction. Under the programme, which will be for 2021-22, RBI will commit "upfront to a specific amount of open market purchases of government securities with a view to enabling a stable and orderly evolution of the yield curve amidst comfortable liquidity conditions," Governor Shaktikanta Das said while announcing the monetary policy. For the first quarter of the financial year 2021-22, RBI will conduct a G-SAP of Rs 1 lakh crore, and the first purchase of government securities for an aggregate amount of Rs 25,000 crore will be conducted on April 15, Das said. The benchmark 10-year bond, which traded at 5.93 per cent (on an average) during April 2020-January 2021, spiked to 6.25 per cent on March 10, 2021 before coming down again. In sync with <keyword id="6375573" type="COMPANY" weightage="20" keywordseo="G-sec">G-Sec</keyword> yields, corporate bond yields also hardened across issuers and rating categories in the recent period. During the post policy conference, Das told reporters that G-SAP is different from the regular <keyword id="475574" type="COMPANY" weightage="20" keywordseo="open-market-operations">Open Market Operations</keyword> (OMOs) that RBI conducts. "It has a distinct character, in the sense that for the first time we are giving out a particular quantum of bond purchase in the secondary market. Within this particular quarter, we will be suitably depending on the evolving situation and will be announcing auctions from time to time," he said. Deputy Governor Michael <keyword id="49966" type="COMPANY" weightage="20" keywordseo="Patra">Patra</keyword> said that with this, RBI, for the first time, is committing its balance sheet to the conduct of monetary policy. "When we are unchanged on the policy rate, we need an instrument to run monetary policy. In the past, all our actions were to move the interest rates up and down and ensure that proper transmission happens across the market spectrum. This time we are being more explicit. "We are not waiting for the indirect channel of interest rates and prices to operate. We are directly committing an expansion in our balance sheet of a certain specified amount which is known to the public with the hope of ensuring orderly conditions in the market," Patra added. Giving up an amount upfront also helps market participants to plan their engagement with the borrowing programme, he noted. G-SAP will run alongside RBI's regular operations including Liquidity Adjustment Facility (LAF), OMOs and operation twist, Patra said, adding that the programme is built into the central bank's liquidity planning framework for 2021-22 as a whole. Das said the positive externalities of G-SAP 1.0 operations need to be seen in the context of those segments of the financial markets that rely on the G-Sec yield curve as a pricing benchmark. When asked whether RBI will announce the amount every quarter under G-SAP, the Governor said it is not a one-off kind of thing and the effort will be to continue with G-SAP. The central bank also announced that it will conduct 14-day Variable Rate Reverse Repo (VRRR) auctions of longer maturity as indicated in the Revised Liquidity Management Framework announced on February 6, 2020. The amount and tenor of these auctions will be decided based on the evolving liquidity and financial conditions, RBI said. "This is a part of RBI's liquidity management operations and should not be read as liquidity tightening. In fact, by paying a higher rate of interest on liquidity absorptions through the VRRR auctions, the RBI is indirectly expanding liquidity," Das emphasised. While laying out the liquidity management strategy for 2021-22, Das said RBI's endeavour is to ensure orderly evolution of the yield curve, governed by fundamentals as distinct from any specific level thereof. "Our objective is to eschew volatility in the G-Sec market in view of its central role in the pricing of other financial market instruments across the term structure and issuers, both in the public and private sectors," he said. This is a necessary pre-requisite for the nascent and hesitant recovery to firm up and become durable. Das also urged market participants to pay heed to RBI's actions, communication and signals in a balanced manner. "Together, we can overcome the challenges and lay the foundations for a durable recovery beyond the pandemic. Let us prepare for our tryst with our potential firmly," he added. Further, RBI extended on-tap targeted Long Term Repo Operations (<keyword id="2636226" type="COMPANY" weightage="20" keywordseo="TLTRO">TLTRO</keyword>) by six months to September 30. The scheme was announced in October last year and was available till March 31, 2021. To ensure continued flow of credit to the real economy, RBI also extended fresh support of Rs 50,000 crore to All India Financial Institutions (AIFIs) for new lending in the current financial year. Accordingly, Rs 25,000 crore will be provided to NABARD; Rs 10,000 crore to National Housing Bank (NHB) and Rs 15,000 crore to Small Industries Development Bank of India (SIDBI). Further, the timeline for banks to on-lend through non-banking finance companies has been extended by six months to September 30.

RBI initiates G-SAP 1.0 to keep the balance between yield curves and liquidity

<ul><li>The Reserve Bank of India (RBI) Governor <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword> was doling out optimism to the market at today’s Monetary Policy Committee (<keyword id="6369693" type="UNKNOWN" weightage="20" keywordseo="MPC">MPC</keyword>) briefing. </li><li>The MPC will be expanding the limit of open market operations (OMOs), providing on-tap TLTRO of ₹1 lakh crore, and introducing State Development Loan (SDL) OMOs.</li><li>While these measures may ease some tensions in the short run, the markets still seek predictability and interest rate cuts. </li><li>Das said that both the apex bank and markets can operate in the same space in competition without necessarily being combative. </li></ul>The Reserve Bank of India (RBI) Governor Shaktikanta Das delivered a <a href="https://www.businessinsider.in/policy/economy/news/rbis-mpc-keeps-the-policy-rates-unchanged-to-maintain-accommodative-stance-for-inflation/articleshow/78566955.cms">chipper note</a> on India’s recovery today. According to him, even though there’s some disconnect between the RBI and the markets, all will be well — soon. However, what the market participants want is for the RBI to acknowledge that the economy is in deep trouble and, therefore, cut interest rates further, boost money supply, and ease credit. <div type="Article" hostid="261" msid="78566955" title="RBI says it has decided to 'look through' the current 'high inflation' as it won’t last long⁠ but leaves interest rates unchanged" mstype="2" mssubtype="0"></div> The deep contraction of economic growth witnessed in the first quarter is behind us, he said, while emphasising that some silver linings are already visible. However, not all that glitters is gold. “We remain circumspect about generalising these early greenshoots, as they have benefitted from base effects and one-off shifts in some sectors,” said ratings agency ICRA. Despite Governor Das’ attempt to ease those tense nerves in the market, the argument seems far from over. “The <keyword id="64190" type="POSITION" weightage="20" keywordseo="RBI-Governor">RBI governor</keyword>'s push for optimism is bordering on the edge of hope,” said Sushil Kedia, the founder of KEDIANOMICS. “What's going to happen over the next one month or three is anybody’s guess.” <div type="image" title="India gdp by quarter" msid="78574635" hostid="261" caption="&amp;lt;p&amp;gt;India&amp;#39;s GDP numbers over the last two years and RBI&amp;#39;s expectations for the second half of the fiscal year&amp;lt;/p&amp;gt;"></div> The question to ask here is not who is right and who is wrong, but what happens if any one of them is wrong. If the markets are wrong and the economy recovers by March 2021, they will be in for a surprise. However, if the RBI is wrong and the economy is worse off than the picture painted by the Governor, the implication may be more dire for everyone in the country. Not just growth, RBI hopes the inflation wave will also ebb on its own “MPC has decided to look through the current inflation as a transient hump,” Governor Das explained, adding that inflation will ease between January and March next year. However, Kedia is less sanguine than the RBI Governor. “The interest rate cycle has been so overstretched and soft for so long, that I do see signals in long term data analysis, that at any point far sooner than one would expect, some global events will start reversal of the interest rate cycle,” he said. <div type="image" title="INflation india (1)" msid="78574672" hostid="261" caption="&amp;lt;p&amp;gt;Inflation in India since the outbreak of the coronavirus pandemic in the country&amp;lt;/p&amp;gt;"></div> “The relative economic growth differential between China and the rest of the world is almost 13-14%,” he added. The point Kedia is making is that if inflation rises in the rest of the world, even India will have to raise interest rates to tackle the prices, and the RBI is not preparing for it. While not the most obvious possibility, only time will tell if Kedia’s fear is proven right. RBI’s efforts have been lauded but in parts While the RBI has opened the liquidity taps time and again, a big concern in the market is that both central and state governments need to borrow more and more to meet the rising expenses due to the pandemic. The RBI said that it would buy long-term bonds — issued by both states and the centre — on tap worth ₹20,000 crore, up to ₹1 lakh crore in the coming days. <div type="image" title="india govt debt" msid="78574919" hostid="261" caption="&amp;lt;p&amp;gt;Indian government owes lenders more than &amp;#8377;101 trillion&amp;lt;/p&amp;gt;"></div> That would provide the money states need, but it will also mop up the funds that would have otherwise been available for private borrowers. In these challenging times, it is believed that lenders would rather give money to a government than risky private parties. And that would mean that the borrowing rates for private companies will remain higher than what it should have been. “It also remains to be seen if the commitment to facilitate state and central government borrowing, as well as the explicit signals aimed at softening yields, are adequate for bond markets to shrug off concerns regarding the fiscal health of the central and state governments,” ICRA pointed out. Back to the demand for another rate cut Essentially, private borrowers are back to seeking interest rate cuts, which the RBI seems reluctant to execute at this point. “These (measures announced today) should be beneficial for banks who are comfortable with the credits of corporates to lend as banks' borrowing rates are fixed. In case the repo rates are cut again, banks can refinance at lower rates also,” said Murthy Nagarajan, the head of fixed income at Tata Mutual Fund. <div type="image" title="Copy of TCS share price 2" msid="78575065" hostid="261" caption="&amp;lt;p&amp;gt;Nifty 50 closes above 11,900 points after RBI&amp;#39;s announcement today&amp;lt;/p&amp;gt;"></div> Instead of directly cutting rates, the RBI has offered up open market operations (OMOs), which — according to Abhishek Goenka, the founder and CEO of India Forex Advisors (IFA) — will help bring borrowing rates down in the commercial paper market. OMOs are conducted by the central bank to give or take currency from a bank or group of banks by buying or selling government bonds on the open market. It’s an instrument banks can use to increase or shrink liquidity in the market. “RBI was doing OMOs on an ad hoc basis,” explained Goenka, essentially saying that while RBI may be taking necessary steps, they haven’t been very predictable. And markets hate surprises. <div type="image" title="Copy of nifty50" msid="78575238" hostid="261" caption="&amp;lt;p&amp;gt;India&amp;#39;s 10-year bond yeilds over the last one month&amp;lt;/p&amp;gt;"></div> Until September 30, it wasn’t clear how cash-strapped state governments would find the money to meet the additional expenses in the wake of the pandemic. The markets are glad that RBI has opened up the emergency borrowing window — called ways and means advances or WMA — <a href="https://www.businessinsider.in/policy/economy/news/india-leaves-borrowing-calendar-unchanged-target-remains-at-12-lakh-crore/articleshow/78407506.cms">until the end of the fiscal year by 60%</a>. WMA essentially means that governments can borrow directly from the RBI to meet their emergency needs. That leaves more money in the market for private borrowers. While the decision came just in time, there was enough fear and chaos in the run-up to it. What the markets want are predictability and interest rate cuts. Meanwhile, the Governor has asked the market to keep the faith. “We look forward to cooperative solutions for the borrowing program for the second half of the year… These views can be competitive without being combative,” he said. SEE ALSO: <a href="https://www.businessinsider.in/policy/economy/news/rbis-mpc-keeps-the-policy-rates-unchanged-to-maintain-accommodative-stance-for-inflation/articleshow/78566955.cms">RBI says it has decided to 'look through' the current 'high inflation' as it won’t last long⁠ but leaves interest rates unchanged</a> <a href="https://www.businessinsider.in/business/corporates/news/tcs-beats-accenture-to-become-the-worlds-most-valuable-it-services-company/articleshow/78566487.cms">TCS beats Accenture to become the world’s most valuable IT services company — but this not the first time it has raced ahead</a> <a href="https://www.businessinsider.in/india/news/union-minister-ram-vilas-paswan-dies-at-74/articleshow/78558640.cms">India's consumer affairs minister Ram Vilas Paswan passes way at 74</a> <a href="https://www.businessinsider.in/science/space/news/mars-will-appear-bigger-redder-and-brighter-on-october-13-and-wont-get-this-close-to-earth-again-until-2035/articleshow/78556539.cms">Mars will appear bigger, redder, and brighter on October 13 — and won’t get this close to Earth again until 2035</a>

RBI Governor wants markets to keep the faith but traders want something more

By Hitesh Vyas Mumbai, Apr 21 () Only a dozen-odd of the 52 micro lenders have investment grade ratings and are thus eligible to issue debt instruments that can be picked by banks using the Rs 50,000-crore special liquidity tap that the Reserve Bank of India has opened up over the weekend. Last April 17, the central bank announced a Rs 50,000-crore focused liquidity injection through what it calls a new model of its targeted long-term repo operations (TLTRO 2.0) aimed solely at small and medium non-banking financiers, housing finance companies and micro-lenders. "Our own survey shows that only 12 members, one with 'AA' and 11 with 'A', have investment grade ratings, and, therefore, they are the ones who are most likely to get the money under TLTRO 2.0," Micro Finance Institutions Network (MFIN) Chief Executive Harsh Shrivastava told . MFIN is a self-regulatory organisation (SRO) of NBFC-MFIs. The rest of the players have either BBB/BB or lower ratings, he added. Shrivastava, however, welcomed the TLTRO 2.0 saying it can help large micro-lenders with investment grade ratings to get cheaper funds. Of the 52 MFIs, 21 are large with a portfolio of over Rs 500 crore, 19 are mid-sized with a loan portfolio of Rs 100-500 crore and 12 are small ones with under Rs 100 crore loan book, he said. Typically, debt instruments with AAA rating carry the lowest credit risk, thus have the highest degree of safety regarding servicing of financial obligations. A 'BBB-' is the lowest investment grade rating on a debt instrument that can attract investments. And, any rating below this is riskier debt and thus attracts higher coupons, given the inherent risks the issuer faces in meeting debt obligations. The RBI will conduct the first auction for the three-year TLTRO 2.0 for Rs 25,000 crore on April 23 at 4.40 per cent. The funds availed under TLTRO 2.0 will have to be deployed in investment grade bonds, commercial papers and non-convertible debentures (NCDs) of non-banking financial companies (NBFCs) and at least 50 per cent of the fund should go to small and mid-sized NBFCs and micro-finance institutions (MFIs). Of the 50 per cent, 10 per cent or Rs 5,000 crore will have to be invested in debt issued by MFIs, 15 per cent into debt issued by NBFCs with an asset size of Rs 500 crore and below and 25 per cent in securities issued by NBFCs with assets size between Rs 500 crore and Rs 5,000 crore. The deployment of funds availed under TLTRO 2.0 in the primary market cannot exceed 50 per cent of the amount availed of, the RBI had said last Friday announcing the liquidity window. According to India Ratings Director Prakash Agarwal, "Small and medium NBFCs have limited presence in the capital market and thus investments through secondary market transactions are not feasible for them." NBFCs with an asset size between Rs 500 crore and Rs 5,000 crore generally have BBB/A-rating though may have weaker liquidity and other buffers than higher-rated issuers. With a large segment of NBFC customers likely to be significantly hit by the COVID-19 lockdown, delinquencies can disproportionately rise for them with weaker collections, impacting their overall liquidity. "Thus, banks' risk appetite to take additional exposures on NBFCs through their debt, in the absence of any credit guarantee support, that too for a long three-year period, remains to be seen," Agarwal pointed out. It can be even more challenging for NBFCs with a balance sheet size of under Rs 500 crore, especially as a large number of them will not have investment grade ratings. According to rating agency ICRA, only 23 MFIs or around 60 per cent of the industry, have investment grade ratings. Shrivastava also said MFIs may face challenges in issuing bonds or commercial papers during the COVID-19 lockdown period and that "for others who have BB or lower ratings, giving moratorium is still the simplest and fastest way to get money". On Sunday, State Bank of India Chairman Rajnish Kumar had said banks could support NBFCs/MFIs by helping them issue bonds that can be funded through the TLTRO scheme. Kumar also said he was even ready to provide liquidity to those MFIs that don't have an investment grade rating, if they have a good credit history. "If MFIs are not eligible for bonds because they do not have the required investment grade ratings, then we may be comfortable giving loans to them on the basis of their credit history," Kumar had said. NBFCs and MFIs have been demanding that banks extend the three-month moratorium announced by the RBI on March 27 to them. Despite not getting a moratorium from banks, MFIs have extended the same to their borrowers. Many analysts have said that in the absence of moratorium, these micro lenders can face severe liquidity challenges, which would affect their debt servicing capability. The last week's meeting of the Indian Banks' Association (IBA) to decide on granting loan moratorium to NBFCs and MFIs was inconclusive as lenders could not come to a consensus. IBA will now approach the RBI to seek some clarification on the issue. HV HRS

You Searched For "on tap tltro rbi" and got 4 results

RBI to conduct on-tap TLTRO worth ₹1 lakh crore

PTI

RBI initiates G-SAP 1.0 to keep the balance between yield curves and liquidity

PTI

RBI Governor wants markets to keep the faith but traders want something more

Prabhjote Gill

Only dozen-odd MFIs can gain from RBI's special liquidity window

PTI