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RBI extends long-term credit facility for banks till December 31, 2021

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

The Reserve Bank of India (RBI) has extended the tap on Special Long-Term Repo Operations (SLTRO) for Small Finance Banks (SFBs) till December 31, 2021. This will enable financial institutions to provide credit support to micro, small and medium enterprises, which will protect them from the impact of the coronavirus pandemic.

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

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

This facility was applicable till 31 October 2021, which has now been extended till 31 December 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?

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

How does the SLTRO facility help banks?

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

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