Source: Reserve Bank of India · RBI/2008-09/169 · issued 16 Sep 2008 · ~2 min read
Quick answerRBI allows banks to borrow up to 1% of NDTL as extra LAF liquidity, temporarily, even if it causes SLR shortfall. Banks must apply in writing to avoid penal interest on that shortfall. Effective from September 17, 2008.
What changed
Previously, banks could only access LAF using securities exceeding their SLR requirement. Now, as a temporary measure, banks can get additional LAF support up to 1% of net demand and time liabilities, even if it creates an SLR shortfall. Banks must write to RBI under Section 24(8) to request waiver of penal interest on that shortfall.
What it means for you
This gives banks extra liquidity headroom during tight conditions without immediate penalty for SLR non-compliance. It signals RBI's willingness to ease liquidity constraints temporarily. Banks should factor this into their liquidity planning but note the ad hoc nature—review is continuous.
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
Apply in writing to RBI under Section 24(8) if you avail this additional LAF and face SLR shortfall, requesting no penal interest.
Monitor LAF/SLAF auctions from September 17, 2008 to access the extra 1% of NDTL support.
Track evolving liquidity conditions as this measure is temporary and subject to review.
Coordinate with treasury to ensure eligible collateral is available for LAF operations.
Who it affects
All scheduled commercial banks, Treasury departments managing liquidity, Compliance teams handling SLR reporting
❓ Common questions
Regulatory timeline
Stated effective dateEffective from September 17, 2008
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn05 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the maximum additional liquidity I can avail under this measure?
Up to one per cent of your bank's net demand and time liabilities (NDTL), purely as a temporary facility.
Do I need to pay penal interest if SLR shortfall occurs due to this additional LAF?
Not if you apply in writing to RBI under Section 24(8) of the Banking Regulation Act, 1949, requesting waiver of penal interest. The circular advises banks to do so.
Is this a permanent change to LAF rules?
No, it is explicitly ad hoc and temporary. RBI will review it continuously based on liquidity conditions.
📜 This document’s life story (3 recorded events, each backed by RBI’s own words)
RBI’s words: “Please refer to our circular DBOD. No. Ret. BC. 43/12.02.001/2008-09 dated September 16, 2008”
Repealed byRBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #2117: DBOD.No.Ret.BC.43/12.02.001/2008-09 — "Section 24 of the Banking Regulation Act, 1949 - Shortfall in Maintenance of Statutory Liquidity Ratio (SLR) - Addition”
📜 Read the original circular — full text as issued by RBI
RBI/2008-09/169
Ref. DBOD.No.Ret.BC.43/12.02.001/2008-09
September 16, 2008
All Scheduled Commercial Banks
Dear Sir,
Section 24 of the Banking Regulation Act, 1949 – Shortfall in Maintenance of Statutory Liquidity Ratio (SLR) – Additional Liquidity support under Liquidity Adjustment Facility (LAF)
At present, banks obtain liquidity from the Reserve Bank under the liquidity adjustment facility (LAF) against the collateral of eligible securities that are in excess of their prescribed statutory liquidity ratio (SLR). It has been decided that, in addition, purely as a temporary measure, scheduled banks may avail additional liquidity support under the LAF to the extent of up to one per cent of their net demand and time liabilities.
It is advised that for any shortfall in maintenance of SLR arising out of availment of this additional liquidity support under LAF, bank may apply to the Reserve Bank in writing under sub-section (8) of Section 24 of the Banking Regulation Act, 1949 with a request not to demand payment of the penal interest thereon.
The additional liquidity support will be available with effect from the LAF/SLAF auctions of September 17, 2008. In this context, a reference may also be made to paragraph 4 of circular FMD.MAOG.No.25/01.01.01/2008-09 dated September 16, 2008.
This measure is ad hoc, temporary in nature and will be reviewed on a continuous basis in the light of the evolving liquidity conditions.
Yours faithfully
(Vinay Baijal)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/169 · issued 16 Sep 2008. The plain-English explanation above is BankPulse’s own independent summary.
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
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=4470&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.
Help us keep this accurate
Found an inaccuracy or have an improvement? Tell us. Every report is reviewed by our team before any change is made — nothing goes live unverified.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
BANKPULSE · FREE DAILY BRIEF
Get RBI updates for your role
Every important RBI update, decoded in plain English — for your career, exams & financial awareness.
We collect only your email, name and role, used solely to send your brief — never sold or shared. Withdraw anytime via the unsubscribe link in any email. Independent platform, not affiliated with the RBI. Information, not legal advice.
REPORT AN ERROR · BETA
Spotted an error? Earn 500 BankPulse Credits
Help us stay accurate. If your correction is verified true and approved by our founder, you earn 500 BankPulse Credits — redeemable when the platform monetises.
Reviewed by a human before any credit is awarded. We never change the site from crowd input without verification.
WANT A NEW FEATURE · BETA
What would make BankPulse more useful for you?
Tell us what to build next — a tool, a data view, a role page, anything. We read every suggestion.
Thank you — your ideas directly shape what we build.