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RBI announces special liquidity measures for banks

Thursday, May 27, 2010
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Mumbai: The Reserve Bank of India (RBI) today allowed banks to draw additional funds from it by opening a second window, to meet the expected cash crunch in the system on account of Rs 1 lakh-crore demand of corporate to meet their 3G fee and advance tax payment requirement . At present, the Reserve Bank offers only one window-- the Liquidity Adjustment Facility (LAF)-- to banks between 9.30 am and 10.30 am everyday to lend or borrow from it against government securities. RBI manages daily money supply in the system through LAF. Starting from May 28, the apex bank will allow banks to avail of the second such measure for half an hour between 4 pm and 4.30 pm. The facility will allow banks to borrow more from the central bank to the tune of 0.5 per cent of their deposits. In the first LAF of the morning hours, banks can borrow or lend as much as their requirements. However, RBI sees money supply in the system before accepting or rejecting their demands. The second window may inject up to Rs 25,000 crore--0.5 per cent of the total bank deposits of Rs 50 lakh crore at present.
Source: PTI
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