RBI has extended the long term loaning facility for small finance banks till December 31, 2021The 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 allow the financial institutions to offer credit assistance to micro, little and medium business, which would insulate them from the effect of Coronavirus pandemic.This was announced by the pinnacle count on Monday, just days after it had shown throughout its monetary policy review that the tap on the SLTRO facility will be extended.The RBI had actually offered a three-year SLTRO center to small banks worth Rs 10,000 crore at repo rate in May this year, to enable them to assist in fresh loaning of around Rs 10 lakh per borrower.This center applied till October 31, 2021, which has actually now been extended till December 31 of this year.The extension was provided by the central bank, bearing in mind the effect of the Coronavirus pandemic on small companies and micro and medium industries.What is SLTRO?It is usually called long-term repo operations and is a tool under which RBI provides cash to the banks at repo rate.
In return, it accepts federal government securities as collateral.
The facility is typically provided for a duration of one year to three years.How does SLTRO center helps banks?This is rather useful for banks as they get long term funds at lower rates.
Under this tool, banks are able to supply loans to loan providers at lower interest rates, without minimizing the repo rates repaired by RBI.