Following the launch of Emergency Credit Line Guarantee Scheme 2.0 (ECLGS 2.0), the Reserve Bank of India (RBI) today proposed to bring the 26 stressed sectors identified by the Kamath Committee within the ambit of sectors eligible under on-tap TLTRO.
In a statement, RBI highlighted that as part of Atmanirbhar Bharat Package 3.0 announced on November 12, 2020, the Central Government launched Emergency Credit Line Guarantee Scheme 2.0 (ECLGS 2.0) under which the corpus of Rs3.0 lakh cr of existing ECLGS 1.0 was extended to provide 100% guaranteed collateral-free additional credit to entities in 26 stressed sectors identified by the Kamath Committee of RBI plus health care sector with credit outstanding of above Rs50cr and up to Rs500cr as on 29.2.2020.
Thereby, RBI said, " Accordingly, in addition to the five sectors announced under the scheme on October 21, 2020, it is now proposed to bring the 26 stressed sectors identified by the Kamath Committee within the ambit of sectors eligible under on tap TLTRO."
According to RBI, banks are encouraged to synergise the two 2 schemes by availing funds from RBI under on tap TLTRO and seek guarantee under ECLGS 2.0 to provide credit support to stressed sectors.
RBI said, "Liquidity availed by banks under the scheme should be deployed in corporate bonds, commercial papers, and non-convertible debentures issued by the entities in specific sectors over and above the outstanding level of their investments in such instruments as on September 30, 2020."
Further, RBI stated that the liquidity availed under the scheme can also be used to extend bank loans and advances to these sectors. Investments made by banks under this facility will be classified as held to maturity (HTM) even above the 25% of total investment permitted to be included in the HTM portfolio. All exposures under this facility will also be exempted from reckoning under the large exposure framework (LEF).
On October 09, 2020, RBI had announced the TLTRO on Tap Scheme which will be available up to March 31, 2021. Also, RBI had decided to conduct on tap TLTRO with tenors of up to three years for a total amount of up to Rs1 lakh cr at a floating rate linked to the policy repo rate with flexibility to enhance the amount and period after a review of the response to the scheme.
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