The Reserve Bank of India (RBI) has brought 26 stressed sectors, identified by the Kamath Committee, within the ambit of sectors eligible under on-tap Targeted Long-Term Repo Operations (TLTRO), up from the five sectors it allowed earlier. TLTRO is a special window through which banks can borrow money for one to three years at repo rate to lend to specified sectors.

But the past TLTROs have not been a big incentive to banks. Out of the total TLTROs of Rs 2.12 lakh crore, banks only borrowed Rs 77,000 crore.

The central bank has asked banks to synergise the TLTRO and the emergency credit line guarantee scheme 2.0 (ECLGS 2.0) by borrowing funds at cheaper rates and to provide credit support to stressed sectors. The government has launched ECLGS 2.0 for the healthcare sector and 26 stressed sectors with credit outstanding of above Rs 50 crore and up to Rs 500 crore as on 29 February.

The on-tap TLTRO scheme is deployed in corporate bonds, commercial paper, and non-convertible debentures issued by banks in five specific sectors over and above the outstanding level of their investments in such instruments as on 30 September. Under the ECLGS scheme, entities get additional credit up to 20% of outstanding credit with a tenor of five years, including one-year moratorium on principal repayment. This scheme will be available till 31 March 2021.

The five sectors where the money borrowed under TLTRO window could be used were agriculture, agri-infrastructure, secured retail, MSME, and drugs, pharmaceuticals and healthcare.

The expert committee-headed by New Development Bank's former president KV Kamath—stated that financial parameters need to be considered in the resolution plans under the ‘Resolution Framework for Covid-19-related Stress', along with sector-specific benchmark ranges for such parameters.

Banks can use these funds to buy corporate bonds, CDs, NCDs, or to extend loans to targeted sectors. It also allowed regional rural banks to participate in the money market.