The RBI on Tuesday said banks will have 45 days to invest the cheaper funds raised through the second version of the targeted long-term repo operations (TLTROs) in view of disruptions because of the coronavirus outbreak.
Like in the case of the first TLTROs, the central bank has retained the penal clause of paying an additional 200 bps interest over the 4.40 repo rate for the unutilised fund.
The move will help more small and medium non-banking financial companies, housing finance companies and micro-finance institutions — which typically have lower ratings — enter the debt market and raise cheaper funds as the debt supply from these companies are far and few.
In TLTRO, the maximum time frame to invest in debt instruments like corporate bonds, commercial papers and NCDs was 30 days and a failure would involve them paying additional penal interest of 200 bps over the repo.
