LAF: Reverse Repo Cap Removed, Second Window Scrapped
No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2007-2008/106 · issued 31 Jul 2007 · ~2 min read
Quick answerRBI removed the Rs 3,000 crore daily reverse repo ceiling under LAF and withdrew the Second LAF (SLAF) effective August 6, 2007. LAF now operates as a single window from 9:30-10:30 am on a fixed rate basis, with RBI retaining flexibility to adjust terms.
The rule, in the simplest words
Banks can now borrow unlimited money from RBI overnight by giving government bonds (reverse repo) at a fixed interest rate, with no daily limit.
The second auction window (Second LAF) that happened in the afternoon is removed, so all borrowing/lending with RBI happens only in one morning window from 9:30 to 10:30 am.
RBI can change the interest rate or make the loan longer than one night if needed, and can say no to some requests.
Banks must stop using the old afternoon window (3:00-3:45 pm) for their daily cash management from August 6, 2007.
How it plays out — a real example
A branch operations officer in Indore, Priya, manages her bank's daily cash. On August 6, 2007, she tells her team they no longer have a 3:00 pm auction to park extra cash, so they must finish all borrowing or lending with RBI in the single 9:30-10:30 am window. She also notes they can now lend any amount to RBI at the fixed rate, which helps her plan better when the bank has surplus funds.
What changed
The Rs 3,000 crore ceiling on daily reverse repo under LAF was withdrawn from August 6, 2007, though RBI may re-impose it later. The Second LAF (SLAF), conducted daily between 3:00-3:45 pm since November 28, 2005, was also withdrawn from the same date. LAF now operates as a single window from 9:30-10:30 am on a fixed rate basis, with RBI retaining discretion to use fixed or variable rates and conduct overnight or longer term operations.
What it means for you
Banks can now access unlimited reverse repo at the fixed rate during the LAF window, improving liquidity management flexibility. The removal of the ceiling signals RBI's intent to absorb excess liquidity more freely, which may help stabilize short-term rates. The withdrawal of SLAF simplifies daily operations, reducing the need for a second auction window.
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
Update your treasury's LAF bidding strategy to account for unlimited reverse repo availability from August 6, 2007.
Adjust internal liquidity management processes as the SLAF window (3:00-3:45 pm) is no longer available.
Monitor RBI announcements for any re-imposition of reverse repo ceiling or changes to auction type (fixed vs variable).
Ensure compliance with the single LAF window timing (9:30-10:30 am) for all repo/reverse repo operations.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Primary Dealers, Treasury departments of banks, Liquidity managers and ALCO teams
❓ Common questions
Regulatory timeline
Stated effective dateeffective August 6, 2007
Decoded by BankPulse2026-06-19 15:36 IST
Status change: withdrawn2026-07-13T04:47:15
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What was the Rs 3,000 crore ceiling on reverse repo?
It was a daily cap on the amount banks could park with RBI under reverse repo. With its removal, banks can now place unlimited funds at the fixed reverse repo rate during the LAF window.
Why was the Second LAF (SLAF) withdrawn?
RBI cited current macroeconomic and liquidity conditions. The SLAF, introduced in November 2005, was a second daily auction from 3:00-3:45 pm. Its withdrawal simplifies LAF to a single window.
Will LAF auctions remain fixed rate?
Yes, until further notice, LAF auctions will be on a fixed rate basis. However, RBI retains flexibility to switch to variable rates or conduct longer term operations as needed.
📜 Read the original circular — full text as issued by RBI
RBI/2007-2008/106
FMD.MOAG
No.17/01.01.01/2007-08
July
31, 2007
To
All
Scheduled Commercial Banks (excluding RRBs) and Primary Dealers
Dear
Sir,
Liquidity
Adjustment Facility
Please
refer to paragraph 100 and 103 of the First
Quarter Review of Annual Monetary Policy for the year 2007-08 and our circulars
FMD.
No.2/01.01.01/2005-06 dated November 25, 2005 and FMD.MOAG
No.12 /01.01.01/2006-07 dated March 2, 2007 .
2.
In view of the current macroeconomic and overall monetary and liquidity conditions,
it has been decided to withdraw the ceiling of Rs. 3,000 crore on daily reverse
repo under the LAF with effect from August 6, 2007 (Monday). The Reserve Bank,
however, retains the discretion to re-impose a ceiling as appropriate.
3.
On a review, the Second LAF (SLAF) introduced in November 28, 2005 and conducted
between 3.00-3.45 pm on a daily basis is being withdrawn w.e.f. August 6, 2007.
The Reserve Bank would continue to conduct LAF operations between 9.30 am and
10.30 am as a single LAF window. Until notified, these auctions will be on a fixed
rate basis as hitherto.
4.
However, the Reserve Bank has the flexibility to conduct repo/reverse repo auctions
at a fixed rate or variable rates as circumstances warrant. The Reserve Bank also
retains the option to conduct overnight or longer term repo/reverse repo under
the LAF depending on market conditions and other relevant factors. The Reserve
Bank will continue to use this flexibility including the right to accept or reject
tender(s) under the LAF, wholly or partially, if deemed fit, so as to make efficient
use of the LAF in daily liquidity management.
5.
The other terms and conditions for LAF remain as notified by our earlier circular
FMD.MOAG
No.13 /01.01.01/2006-07 dated March 30, 2007 .
Yours
faithfully
(Chandan
Sinha)
Chief General
Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-2008/106 · issued 31 Jul 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=3748&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.
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