Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Industry / Banking/  Long-term reverse repos to have fixed interest rate: RBI
BackBack

Long-term reverse repos to have fixed interest rate: RBI

The monetary authority also clarified that the interest on these repos will be compounded on an annual basis and will be conducted at the prevailing repo rate
  • The central bank also clarified that the maximum amount that a single market participant can bid is less than or equal to the notified amount
  • The monetary authority also clarified that the interest on these repos will be compounded on an annual basis and will be conducted at the prevailing repo rate. (ANI)Premium
    The monetary authority also clarified that the interest on these repos will be compounded on an annual basis and will be conducted at the prevailing repo rate. (ANI)

    MUMBAI : On the eve of the first tranche of the long-term repo operations (LTROs) announced on February 6, the Reserve Bank on Thursday said it will be conducted on a fixed-rate basis and the interest rate will remain fixed for the tenor of the operation.

    The monetary authority also clarified that the interest on these repos will be compounded on an annual basis and will be conducted at the prevailing repo rate.

    Deploying an out-of-the-box tool to ensure permanent and deeper liquidity in the system, which hovers around 2.5 lakh on a daily basis now, the Reserve Bank on February 6, announced 1.5 lakh crore of long-term reverse repo operations beginning Friday when it would conduct an LTRO for 50,000 crore.

    It can be noted that the reverse repos were on average overnight, or intra-day and the longest so far has been 14-days. But now the central bank is offering it in one-year and three-year tenors.

    In a long FAQs on LTROs, the central bank on Thursday said the interest payout on LTROs will have to be made on maturity of the LTROs--on the reversal date-- and that “interest be calculated on a fixed-rate basis and the rate will remain fixed for the tenor of the operation. The interest will be compounded on an annual basis."

    The participants will have to offer securities as collateral for the complete tenor of LTRO and the residual maturity of the securities offered as collateral should be equal or more than the tenor of the LTRO at inception, it said.

    It also said the securities offered as collateral can be substituted at a later date as many times as they wish to in terms of extant guidelines. However, at any point of time, the residual maturity of replacement securities should not be less than the remaining tenor of the LTRO, it added.

    It further said the current margin requirements under LAF as per extant guidelines will be applicable for LTROs as well and also the collateral offered under LTROs will be subjected to variation margin.

    The securities offered as collaterals will be marked-to-market on a quarterly basis on the basis of the latest prices published by Financial Benchmarks India, the regulator said.

    The central bank also clarified that the maximum amount that a single market participant can bid is less than or equal to the notified amount. But warned that it may reject all the bids of the participant if the total bid amount submitted by the participant exceeds the notified amount.

    Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

    Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
    More Less
    Published: 13 Feb 2020, 10:09 PM IST
    Next Story footLogo
    Recommended For You
    Banking Stocks
    ₹1,053.6-0.5%
    ₹1,440.70.52%
    ₹1,0841.08%
    ₹122.751.3%
    ₹734.052.53%
    Switch to the Mint app for fast and personalized news - Get App