RBI cuts Reverse Repo rate to 3.75%, Rs 50,000 crores for LTRO 2.0

On April 17, 2020, the Reserve Bank of India announced a slew of measures after GoI extended the lock down till May 3, 3030. The Apex bank cut the reverse repo rate to 3.75%. It cut the repo rate to 4.4% from 5.15%. Also, the central bank has announced Rs 50,000 crore for Long Term Repo Operation (LTRO).

Highlights

RBI has eased the Liquidity Coverage Ratio from 100% to 80%. The LCR is the assets held by the banks to make sure its ongoing ability to meet short-term obligations are fulfilled.

The RBI will also provide Rs 50,000 crore special finance assistance to institutions such as SIDBI, NABARD, NHB. This is being done as these institutions are not able to raise fresh resources from the market due to the lock down.

LTRO 2.0

This time the LTRO has been named LTRO 2.0 because, this time the LTRO is to focus on liquidity needs of microfinances and NBFC. Earlier the LTRO went largely to the public sector undertakings and larger corporations.

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