RBI’s 3-year LTRO attracts Rs1.94 trillion worth bids

MUMBAI: The Reserve Bank of India (RBI) received bids worth Rs1.94 trillion for its three-year long-term repo operation (LTRO) on Monday – way ahead of Rs25,035 crore the RBI accepted.

The bids were more than 7.8 times the funds on offer at Rs25,000 crore. The central bank received bids for Rs1.94 trillion, of which it accepted bids of Rs25,035 crore.

“The response to the LTRO has been highly encouraging,” said RBI in a press release.

The RBI’s monetary policy committee on February 6 had maintained status quo for its bimonthly policy review keeping the repo rate unchanged at 5.15 per cent, but had introduced t new liquidity and interest rate measures through the one-year and three-year LTROs, aggregating to Rs1 trillion to improve interest rate transmission and to ease liquidity in the system.

The RBI move is aimed at providing cheaper money to banks at the repo rate so that it can be used to boost credit growth. The central bank also withdrew the daily fixed rate repo and four 14-day term repos every fortnight.

The LTRO assures durable liquidity into the system. The three-year repo rates work out better offerings for banks than one-year deposit rate, which is currently at around 5.3 per cent or three-year G-sec, which is currently at 5.77 per cent.

The LTROs are in addition to the existing liquidity adjustment facility (LAF) and marginal standing facility (MSF) operations. RBI has informed that one-year repo operation will be conducted for the same amount on February 24.

 

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