InvestorQ : What is the Long-term Repo Operation(LTRO) and why RBI has launched it?
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What is the Long-term Repo Operation(LTRO) and why RBI has launched it?

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Rishita Das answered.
1 year ago
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LTRO stands for Long-term Repo Operation and is introduced by RBI to enable better transmission of its monetary policy. Under this, RBI is going to conduct term repos of one-year and three-year tenors of appropriate sizes for up to a total amount of Rs 1 lakh crore at the policy repo rate.

It has been introduced by RBI with a view to ensuring that banks shall have the availability of durable liquidity at a reasonable cost-related to the prevailing market conditions and to assure smooth and seamless credit flows to the productive sectors.
RBI has started the operation from 15 February, at the policy rate existing on the date.

LTRO is going to be a measure that will bring down short-term rates and will also help to boost investment in corporate bonds.  It is one of the measures by the Central government to the yields of bonds and pushes the transmission of earlier rate cuts.
According to the experts, it is a masterstroke by the Governor. While, on one side, it will lower the rates in the short end of the sovereign curve, it will also lower corporate bond yields, deposit and lending rates. So, eventually giving the market a boost in terms of investments.
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