Industry

Response to long-term repo encouraging: RBI

The response to the first long-term repo auction, which was conducted on Monday, was highly encouraging, the Reserve Bank of India said. The central bank has received total bids of ₹1.94 lakh crore, for the three year repo, compared with the notified amount of ₹25,000 crore.

“The response to the long term repo operation (LTRO) has been highly encouraging. The total bids that were received amounted to ₹1,94,414 crore, implying a bid-to-cover ratio (i.e., the quantum of bids received relative to the amount announced) of 7.8,” RBI said in a statement after the first auction on Monday.

“The total amount of bids has, in fact, exceeded the aggregate amount of ₹1 lakh crore proposed to be offered under the LTRO scheme.” RBI will conduct the second issue for ₹25,000 crore on February 24 which will have a 1-year tenor.

In the sixth bimonthly monetary policy review earlier this month, the central bank, while keeping the key interest rate unchanged, had announced that it would conduct term repos of one-year and three-year tenors up to a total amount of ₹1 lakh crore at the policy repo rate, which is 5.15%.

These will allow banks to garner funds cheaper than the prevailing market and in turn, help them to reduce interest rate costs. “This should encourage banks to undertake maturity transformation smoothly and seamlessly so as to augment credit flows to productive sectors,” RBI had said while making the announcement.

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Printable version | Nov 28, 2020 11:40:31 AM | https://www.thehindu.com/business/Industry/response-to-long-term-repo-encouraging-rbi/article30845049.ece

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