What is in news : Finance Minister in Parliament said the RBI has announced Special three-year Long-Term Repo Operations (SLTRO) of Rs 10,000 crore at repo rate for the Small Finance Banks (SFBs), to be deployed for fresh lending of up to Rs 10 lakh per borrower to provide further support to small business units, micro and small industries, and other unorganised sector entities adversely affected during the current wave of the pandemic.

What is SLTRO : Tool under which RBI provides money to the banks at repo rate. It accepts the government securities as collateral. It is usually provided for a period of one year to three years.

Significance of SLTRO:  Beneficial for the banks as they get long term funds at lower rates. This will make the banks to reduce the interest banks for borrowers. Thus, banks reduce their lending rates without reducing the policy rates.

MAHITI FOR PRELIMS

REPO RATE

• Repo rate can be defined as an amount of interest that is charged by the Reserve Bank of India while lending funds to the commercial banks
• ‘Repo’ technically stands for ‘Repurchasing Option’ or ‘Repurchase Agreement’
• Repo rate in India is controlled by the Reserve Bank of India
• A decrease in the repo rates helps in improving the growth and economic development of the country.
• A decline in the repo rate can lead to the banks bringing down their lending rate which is beneficial for retail loan borrowers.