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LAF Modified: Daily Reverse Repo Capped at Rs 3,000 Crore

No longer current — withdrawn, no replacement on file yet

Source: Reserve Bank of India · RBI/2006-2007/279 · issued 02 Mar 2007 · ~1 min read

Quick answerRBI caps daily reverse repo absorption at Rs 3,000 crore from March 5, 2007, with Rs 2,000 crore in First LAF and Rs 1,000 crore in Second LAF, allocated pro-rata if oversubscribed. Banks and primary dealers must ensure clear funds at bid time.

What changed

Starting March 5, 2007, the daily reverse repo absorption under LAF is capped at Rs 3,000 crore, split as Rs 2,000 crore in First LAF and Rs 1,000 crore in Second LAF. Allocations will be pro-rata if bids exceed these limits. Bidders must have clear funds available at bid submission.

What it means for you

This cap tightens liquidity management, limiting the amount banks can park with RBI daily via reverse repo. Banks may face reduced earnings from idle funds and need to plan cash flows more precisely to avoid failed bids. The pro-rata allocation ensures fair distribution when demand exceeds the cap.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Ensure clear funds are available at the time of LAF bid submission to avoid rejection.
Adjust daily liquidity planning to account for the Rs 3,000 crore reverse repo cap.
Monitor LAF auction results for pro-rata allocation if bids exceed limits.
Review internal cash management to optimize use of surplus funds within the new cap.

Who it affects

All Scheduled Commercial Banks (excluding RRBs), Primary Dealers

❓ Common questions

Regulatory timeline

Decoded by BankPulse 2026-06-19 17:52 IST
Status change: withdrawn 10 Jul 2026, 04:04 IST

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What is the new daily reverse repo cap under LAF?

From March 5, 2007, the total daily reverse repo absorption is capped at Rs 3,000 crore, with Rs 2,000 crore in First LAF and Rs 1,000 crore in Second LAF.

How will bids be allocated if they exceed the cap?

Allocations will be made proportionately on a pro-rata basis when tenders exceed the specified amounts.

What happens if a bank bids without having clear funds?

Banks and primary dealers must ensure clear funds are available at bid submission; otherwise, the bid may be invalid.

📜 Read the original circular — full text as issued by RBI

RBI/2006-2007/279
FMD.MOAG No.12 /01.01.01/2006-07
 March 
2, 2007  
 All Scheduled Commercial Banks (excluding RRBs)
and 
Primary Dealers
 Dear Sir,

 Liquidity 
Adjustment Facility – Modified Arrangements 

 Please refer paragraphs 89 and 95 of the Third 
 Quarter Review of Annual Statement on Monetary Policy for the Year 2006-07 
 and the press 
 release issued today on 'Liquidity Management – Modified Arrangements'. 
 The existing arrangements for LAF in place vide our circulars IDMD.OMO 
 No.7/03.75.00/2004-05 dated October 27, 2004 and FMD.MOAG.No.4/01.01.01/2005-06 
 dated February 10, 2006 are being modified in accordance with today's announcement. 
 The revised modifications would come into force starting the First LAF of March 
 5, 2007 and would continue till further notice.

 2. Accordingly, 
starting March 5, 2007 (Monday), daily reverse repo absorptions would be limited 
to a maximum of Rs.3,000 crore each day, comprising Rs.2,000 crore in the First 
LAF and Rs. 1,000 crore in the Second LAF. Allocations would normally be made 
proportionately on a pro-rata basis in case the tenders exceed these amounts.

 3. 
While bidding in LAF auctions, scheduled commercial banks (excluding RRBs) and 
primary dealers should ensure that clear funds are available with them to cover 
the bid at the time of its submission. 
 4. All other terms 
and conditions remain the same as notified earlier.
  Yours 
faithfully
  (Chandan Sinha) 
Chief General Manager

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2006-2007/279 · issued 02 Mar 2007. The plain-English explanation above is BankPulse’s own independent summary.

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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3299&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.