The Long Term Repo Operations (LTRO) LTRO is a tool under which the central bank provides one-year to three-year money to banks at the prevailing repo rate, accepting government securities with matching or higher tenure as the collateral. While the RBI’s current windows of liquidity adjustment facility (LAF) and marginal standing facility (MSF) offer banks money for their immediate needs ranging from 1-28 days, the LTRO supplies them with liquidity for their 1- to 3-year needs. LTRO operations are intended to prevent short-term interest rates in the market from drifting a long way away from the policy rate, which is the repo rate. Hence, statement 1 is correct. Long Term Reverse Repo Operation (LTRO) is a mechanism to facilitate the transmission of monetary policy actions and the flow of credit to the economy. This helps in injecting liquidity in the banking system. The introduction of long-term repo operations (LTRO) will bring down the cost of funds for banks without effectively cutting deposit rates. This decision is likely to make reverse repo rate as the operative policy rate over a point of time. Hence, statement 2 is correct.