RBI gets Rs 1.94 lakh crore bids for maiden Rs 25,000 crore LTRO

By: |
Published: February 17, 2020 8:27:30 PM

Deploying an out-of-the-box tool to ensure permanent and deeper liquidity in the system, which hovers over Rs 2.5 lakh crore on a daily basis now, the Reserve Bank on February 6, had announced Rs 1 lakh crore of long-term reverse repo operations beginning this Monday.

The RBI will conduct the second issue for Rs 25,000 crore on February 24 which will have a one-year tenor.

The Reserve Bank on Monday successfully kicked off the maiden long-term reverse repo operation (LTROs) by conducting a three-year issue worth Rs 25,000 crore for which it received bids of more than Rs 1.944 lakh crore. Deploying an out-of-the-box tool to ensure permanent and deeper liquidity in the system, which hovers over Rs 2.5 lakh crore on a daily basis now, the Reserve Bank on February 6, had announced Rs 1 lakh crore of long-term reverse repo operations beginning this Monday. The RBI will conduct the second issue for Rs 25,000 crore on February 24 which will have a one-year tenor.

“Today, the Reserve Bank conducted the first long term repo operation (LTRO) for a notified amount of Rs 25,000 crore with a three-year tenor in pursuance of the LTROs announced on February 7,” the monetary authority said in a statement. The response to the LTRO has been so encouraging that bids crossed Rs 1,94,414 crore, implying a bid to cover ratio of 7.8. Total amount of bids has, in fact, exceeded the aggregate amount of Rs 1 lakh crore proposed to be offered under the LTRO scheme, it noted.

The central bank allotted the bills on a pro-rata basis to 63 applicants with total allotted amount at Rs 25,035 crore, taking the pro-rata allotment percentage to 12.86. The reversal date of these repos is February 16, 2023, it said, adding the operations were conducted on the E-Kuber platform.

While issuing the LTROs guidelines, the RBI has said these measures would be in addition to the existing LAF and MSF operations. The operations would be conducted at a fixed rate. 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. In case of over-subscription of the notified amount, the allotment would be done on pro-rata basis. RBI will, however, reserve the right to inject marginally higher amount than the notified amount due to rounding effects and the minimum bid amount is Rs 1 crore and in its multiples.

On February 13, the RBI had said the interest on LTROs would be compounded on an annual basis and would be conducted at the prevailing repo rate. It can be noted that the reverse repos were on average overnight, or even intra-day and the longest so far has been 14-days. But now the central bank is offering it in one-year and three-year tenors.

The participants will have to offer securities as collateral for the complete tenor of LTRO and the residual maturity of the securities offered as collateral should be equal or more than the tenor of the LTRO at inception, it said, adding the securities collateral can be substituted at a later date as many times as they wish to in terms of extant guidelines.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Delays in debt recoveries irk Bombay HC; asks Finance Ministry to enhance Debt Recovery Tribunal
2No going back on decision to merge 10 PSBs, says FM Nirmala Sitharaman
3Government closely monitoring agriculture credit given by banks: FM Nirmala Sitharaman