The Reserve Bank of India (RBI) will conduct a second liquidity adjustment facility (SLAF) on a daily basis at 4.15 pm, up to 28 January 2011, to further ease liquidity constraints in the system.
RBI said scheduled commercial banks can avail of additional liquidity support under the Liquidity Adjustment Facility (LAF) to the extent of up to 2.0 per cent of their net demand and time liabilities (NDTL) as on the reporting Friday of the second preceding fortnight.
Banks may avail of this facility, where they may seek waiver of penal interest on a fortnightly basis, purely on an ad hoc, temporary basis, for meeting any shortfall in statutory liquidity ratio (SLR), up to 28 January 2011, RBI said. The liquidity support availed under this facility would, however, need to be reported on a daily basis, it added.
This has been done to bridge the excessive deficit in liquidity as per RBI's stated policy set out in its second quarter monetary policy review, announced on 2 November 2010.
"Even though a liquidity deficit is consistent with anti-inflation stance, excessive deficit in liquidity can be disruptive both, to financial markets and to credit growth in the banking system. To ensure that economic activity is not disrupted by liquidity constraints, the liquidity deficit needs to be contained within a reasonable limit," RBI had stated in the review.
The RBI is also taking a number of steps, including open market operations (OMO) and re-introduced temporary measures, the central bank said in a release.
SLAF is being conducted on a daily basis at 4.15 pm and banks can avail of additional liquidity support under the LAF to the extent of up to 1.0 per cent of their NDTL as on the reporting Friday of the second preceding fortnight up to 16 December 2010.
RBI said the liquidity pressures reflected in its LAF window pointed to the need for continued provision of liquidity comfort. RBI said it has injected liquidity injected over Rs100,000 crore through its LAF window since 8 November 2010.