Reserve Bank Governor Shaktikanta Das on April 17, 2020 announced a slew of liquidity measures to ease financial stress and increase credit flows. Some of these measures are:
Targeted Long-Term Operations (TLTRO) 2.0: A second set of targeted long-term repo operations (TLTRO 2.0) for an initial aggregate amount of Rs. 50,000 crore will be conducted. This is being done to facilitate funds flow to small and mid-sized corporates, including NBFCs and MFIs, who have been more severely impacted by the disruptions due to COVID-19. The funds availed by banks under TLTRO 2.0 should be invested in investment grade bonds, commercial paper, and non-convertible debentures of non-banking financial companies (NBFCs), with at least 50 per cent of the total amount availed going to small and mid-sized NBFCs and micro finance institutions (MFIs).
Refinancing Facilities for All India Financial Institutions: Special refinance facilities for a total amount of Rs. 50,000 crore will be provided to National Bank for Agriculture and Rural Development (NABARD), the Small Industries Development Bank of India (SIDBI) and the National Housing Bank (NHB) to enable them to meet sectoral credit needs. This will comprise Rs. 25,000 crore to NABARD for refinancing regional rural banks (RRBs), cooperative banks and micro finance institutions (MFIs); Rs. 15,000 crore to SIDBI for on-lending / refinancing; and Rs. 10,000 crore to NHB for supporting housing finance companies (HFCs).
Reduction of Reverse Repo Rate under Liquidity Adjustment Facility: Reverse repo rate has been reduced by 25 basis points from 4.0% to 3.75% with immediate effect, in order to encourage banks to deploy surplus funds in investments and loans in productive sectors of the economy. The Governor explained that the surplus liquidity in the banking system, which has risen significantly due to sustained government spending and the various liquidity enhancing measures undertaken by the RBI, is the backdrop to this decision.
Raising Limit of Ways and Means Advances of states and UTs: Ways and Means Advances (WMAs) Limit of states and union territories has been increased by 60% over and above the limit as on March 31, 2020, in order to provide greater comfort to states for undertaking COVID-19 containment and mitigation efforts, and also to help them plan their market borrowing programmes better.
What are Ways and Means Advances: WMAs are temporary loan facilities provided by RBI to help governments tide over temporary mismatches in receipts and expenditure. The increased limit will be available till September 30, 2020.
