The Reserve Bank of India (RBI) will begin the first tranche of its long-term repo operations on February 17 with three-year repo of Rs 25,000 crore, followed by another on February 24 for an equal amount.
The operations date is announced a day after the RBI's monetary policy wherein it said long-term repos aggregating up to Rs 1 lakh crore will be conducted in tranches from mid-February to ease liquidity in the system.
The RBI move is aimed at providing cheaper money to banks at the repo rate and, thus, improve liquidity in the banking system.
Currently, the repo operations are of short-term, usually of overnight, wherein banks can borrow money from the RBI at the prevailing repo rate.
As announced in the statement on 'Developmental and Regulatory Policies' on February 6, 2020, it has been decided to conduct Long Term Repo Operations (LTROs) for one-year and three-year tenors for up to a total amount of Rs 1 lakh crore at the policy repo rate, the RBI said in a release on Friday
Banks would be required to place their requests for the amount sought under LTRO during the window timing at the prevailing policy repo rate. Bids below or above policy rate will be rejected, it added. "In case of over-subscription of the notified amount, the allotment will be done on a pro-rata basis. RBI will, however, reserve the right to inject marginally higher amount than the notified amount due to rounding effects."
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