RBI Provides Guidelines For Special Long-Term Repo Operations For Small Finance Banks

The Reserve Bank of India (RBI) has issued revised operational guidelines on the special long-term repo operations (SLTRO) scheme for small finance banks (SFBs). In the monetary policy announced last week, the RBI had extended the on-tap SLTRO for SFBs till December 31, 2021. This facility was earlier made available till October 31, 2021. All Small Finance Banks (SFBs) eligible under the Liquidity Adjustment Facility (LAF) can participate in the Scheme. There is no tenor restriction regarding lending by SFBs under the scheme. However, the SFBs will have to ensure that the amount borrowed from the RBI should at all times be backed by lending to the specified segments till maturity of the SLTRO. Furthermore, SFBs should endeavour to lend within a reasonable period, i.e., not later than 30 days from the date of availing the funds from RBI. The Scheme will now be operationalised on tap. Accordingly, the last tranche of the SLTRO auction due on October 14, 2021, announced vide Press Release 2021-2022/181 dated May 07, 2021, will not be conducted.

SFBs can place requests for funds in the format enclosed in Annex-2, through e-mail. The Reserve Bank will aggregate all such requests received and release funds every Monday (on the subsequent working day if Monday is a holiday) by initiating a 3-year repo contract at repo rate with the requesting bank. If a bank places multiple requests during the week, all such requests will be aggregated, and a single repo contract will be created on the date of operation. Requests from SFBs desirous of availing funds from the RBI will be subject to availability of funds as on the date of application, i.e., funds cannot be guaranteed in case the total amount of Rs 10,000 crore is already availed. In case the requested amount exceeds the remaining amount under the scheme on the date of operation, the remaining amount will be distributed on pro-rata basis among all the eligible requests.

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