On April 23, the Reserve Bank of India's (RBI) first auction under the targeted long term repo operation 2.0 (TLTRO 2.0) made headlines. This is because the auction elicited a tepid response from bidders. TLTRO 2.0 is the second round of liquidity measures launched by the RBI on April 17.
The idea was to provide cushion for the banking system to lend to small companies in the wake of the COVID-19 outbreak. The first TLTRO was worth Rs 1 lakh crore, which was fully subscribed by banks. Banks invested majority of this fund in big AAA rated firms. In other words, TLTRO was largely aimed at or benefited big companies while the TLTRO 2.0 is tailor-made for smaller companies like MFIs.
In this edition of Business Insight, let's briefly understand what happened in TLTRO 2.0, how is it different from its predecessor and what are the experts saying on the TLTRO 2.0 flop show?
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