TLTRO on Tap Scheme – Inclusion of NBFCs

As stated in the Statement on Developmental and Regulatory Policies on February 05, 2021, RBI announced that the funds from banks under the On Tap TLTRO scheme will now available to Non-Banking Financial Companies (NBFCs).  “It has been decided to permit banks to provide funds under the ‘On Tap TLTRO’ scheme to Non-Banking Financial Companies (NBFCs) for incremental lending to the sectors as indicated in RBI press release 2020-2021/763 dated December 11, 2020, in view of the important role played by NBFCs as well recognised conduits for reaching credit out to the last mile and acting as a force multiplier in expanding credit to various sectors”, the statement said.

RBI had announced the TLTRO(Targeted longer-term refinancing operations) on Tap Scheme on October 9, 2020, which is available up to March 31, 2021. In addition to the five sectors announced under the scheme on October 21, 2020, 26 stressed sectors identified by the  K.V. Kamath Committee were also brought within the ambit of sectors eligible under ‘On tap TLTRO’ on December 4, 2020.  The K.V.Kamath committee appointed by RBI has in its report of August 2020 identified 26 sectors as stressed sectors on account of Covid 19. On the basis of the above report, the regulator announced conducting ‘On tap Targeted Long-term Repo Operations’ of up to three years tenor for a total amount of up to Rs100000 crore at a floating rate linked to the policy repo rate. The Liquidity availed by banks under the above scheme has to be deployed in corporate bonds, commercial paper and non-convertible debentures issued by the entities of five sectors initially identified. The funds flow under the scheme is over and above the outstanding level of their investments in such instruments as of September 30, 2020. Liquidity availed under the scheme can also be used to extend loans and advances to these sectors. Investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of 25 percent of the 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).