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To provide support to NBFCs, which are excluded from the three-month moratorium extended to businesses hit by Covid-19, the RBI had opened a special facility. This was the targeted long term repo operation (TLTRO 2.0). In this window, the RBI would offer cheap three-year funds through targeted long term repo for up to Rs 50,000 crore. Only banks that lent to NBFCs could avail these funds with half of these reserves marked for small finance companies. In Thursday’s Rs 25,000-crore TLTRO, banks applied for only Rs 12,800 crore.
Since the Covid-19 outbreak, the RBI has opened the liquidity tap, leaving banks with nearly Rs 7 lakh crore of surplus funds. By not availing of TLTRO 2.0, banks are sending a signal that they are wary of credit risks. A day before announcing ‘Operation Twist’ on Thursday, banks bought a record Rs 45,000 crore of government treasury bills at rates below the RBI’s reverse repo rate of 3.75%.
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