The Reserve Bank of India has allowed banks to exclude loans extended to non-banking finance companies from the funds availed under the Targeted Long Term Repo Operations ((TLTRO) for determining priority sector targets. This is intended to incentivise banks to lend to NBFCs.
Securities kept in the held-to-maturity category will now be excluded from computation of adjusted non-food bank credit,
The banking regulator had announced TLTRO worth ₹50,000 crore for banks on April 17.
The funds availed of under the facility should be deployed in investment-grade bonds, commercial papers (CPs) and non-convertible debentures (NCDs) of NBFCs, the RBI had said. At least 50% of the total funds availed should be invested in mid and small-sized NBFCs, including micro finance institutions, the RBI had mandated.
The central bank had further clarified that if banks failed to deploy the funds availed within 30 days, there will be steep penalties.
“However, if a bank fails to deploy funds within the specified time frame, the interest rate on undeployed funds will increase to the prevailing policy repo rate plus 200 bps (basis points) for the number of days such funds remain undeployed.
This incremental interest will have to be paid along with regular interest at the time of maturity,” the RBI said.
The first tranche of ₹25,000 crore in the next round of TLTRO will be made on April 23.
