What changed
RBI introduced a Second Liquidity Adjustment Facility (SLAF) effective November 28, 2005, operating in the afternoon from 3:00 PM to 3:45 PM. This is in addition to the existing LAF conducted between 9:30 AM and 10:30 AM. SLAF is a residual facility for fine-tuning liquidity, with settlement conducted separately and on a gross basis.
What it means for you
Banks and primary dealers now have an additional window to manage end-of-day liquidity mismatches, reducing reliance on the overnight call money market. The separate gross settlement ensures no netting with the morning LAF, requiring careful cash flow planning. This enhances RBI's ability to fine-tune systemic liquidity without altering the core LAF structure.
What you must do
- Update your treasury operations to participate in the SLAF auction window from 3:00 PM to 3:45 PM daily.
- Ensure separate settlement arrangements for LAF and SLAF transactions, as they are settled on a gross basis.
- Train dealing room staff on the common tender forms (Annex I & II) for both LAF and SLAF bids.
- Monitor liquidity positions more frequently to leverage the afternoon window for fine-tuning.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Primary Dealers, Treasury and dealing room teams, RBI's Monetary Policy Department
What is the timing of the Second LAF (SLAF)?
SLAF is conducted between 3:00 PM and 3:45 PM, starting November 28, 2005.
How is SLAF settlement different from the regular LAF?
SLAF settlement is conducted separately and on a gross basis, meaning no netting with the morning LAF transactions.
Are the features of SLAF different from the existing LAF?
No, the salient features of SLAF are the same as those of the existing LAF. It is a residual facility for fine-tuning liquidity.