RBI Extends Long Term Lending Facility For Banks Till December 31, 2021


RBI has extended the long term lending facility for small finance banks till December 31, 2021

The Reserve Bank of India (RBI) has extended till December 31, 2021, the tap on special long-term repo operations (SLTRO) for small finance banks (SFBs). This will enable the financial institutions to provide credit support to micro, small and medium enterprises, which would insulate them from the impact of Coronavirus pandemic.

This was announced by the apex bank on Monday, just days after it had indicated during its monetary policy review that the tap on the SLTRO facility will be extended.

The RBI had provided a three-year SLTRO facility to small banks worth Rs 10,000 crore at repo rate in May this year, to enable them to facilitate fresh lending of around Rs 10 lakh per borrower.

This facility was applicable till October 31, 2021, which has now been extended till December 31 of this year.

The extension was given by the central bank, keeping in mind the impact of the Coronavirus pandemic on small businesses and micro and medium industries.

What is SLTRO?

It is generally called long-term repo operations and is a tool under which RBI provides money to the banks at repo rate. In return, it accepts government securities as collateral. The facility is usually provided for a period of one year to three years.

How does SLTRO facility helps banks?

This is quite useful for banks as they get long term funds at lower rates. Under this tool, banks are able to provide loans to lenders at lower interest rates, without reducing the repo rates fixed by RBI.

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