The Reserve Bank will conduct the first auction for special long-term repo operations (SLTRO) of Rs 10,000 crore for Small Finance Banks (SFBs) on May 17.
Context
The Reserve Bank will conduct the first auction for special long-term repo operations (SLTRO) of Rs 10,000 crore for Small Finance Banks (SFBs) on May 17.
About the special long-term repo operations (SLTRO)
- Provisions: Under this RBI has decided to conduct SLTRO of Rs 10,000 crore at the repo rate for the SFBs.
- The lenders can raise funds at the repo rate from the RBI and on-lend to various borrowers up to a limit of Rs 10 lakh per borrower.
- The SFBs have been permitted to treat fresh lending to smaller micro finance institutions or MFIs as priority sector lending.
- The facility will be available till October 31, 2021.
- Reserve Bank of India will conduct one such auction for SLTRO each month.
- The unutilised portion of the notified Rs 10,000 crore will be carried forward in the subsequent auction until fully utilised or till the last auction.
- The SFBs participating in the scheme will have to ensure that the amount borrowed from the RBI should at all times be backed by lending to the specified segments till the maturity of the SLTRO.
- SFBs should endeavour to lend within 30 days from the date of availing the funds from the RBI.
- In case of over-subscription of the notified amount, the allotment will be done on a pro-rata basis.
- Reason: It has been initiated to support to small business units, micro and small industries, and other unorganised sector entities, which are adversely affected during the current wave of the pandemic.
Small Finance Banks
- These banks are established as public limited companies in the private sector under the Companies Act, 2013.
- They are governed by the provisions of Reserve Bank of India Act, 1934, Banking Regulation Act, 1949 and other relevant statutes.
- These Banks provide basic banking service of acceptance of deposits and lending.
- The aim of these banks is to provide financial inclusion to sections of the economy.
- The non-banking financial companies (NBFC), microfinance institutions (MFI) and local area banks (LAB) can also apply to become small finance banks.
Some provisions
- 75% of its net credits should go to the priority sector lending.
- 50% of the loans in its portfolio must in ?25 lakh range
- They must have a capital of at least ?200 crore
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