What changed
The temporary additional liquidity support under LAF, initially allowed from May 28, 2010 to July 2, 2010, has been extended to July 16, 2010. Banks can still avail up to 0.5% of NDTL as extra liquidity against eligible securities beyond their prescribed SLR. Any SLR shortfall due to this facility will be considered for waiver of penal interest on an ad hoc basis.
What it means for you
This extension gives banks two more weeks to manage liquidity pressures without facing penal charges for SLR non-compliance. It signals RBI's continued accommodative stance amid tight liquidity conditions. Banks should factor this into their short-term funding and SLR planning, but note it remains a temporary measure.
What you must do
- Update internal liquidity management systems to reflect the extended LAF window until July 16, 2010.
- Assess current SLR positions and identify if additional liquidity support up to 0.5% of NDTL is needed.
- Prepare documentation to seek waiver of penal interest for any SLR shortfall arising from this facility.
- Monitor RBI communications for any further extensions or changes to this temporary measure.
Who it affects
All Scheduled Commercial Banks, Treasury and ALM desks, Compliance and risk management teams
What is the maximum additional liquidity a bank can avail under this extended facility?
Banks can avail additional liquidity support up to 0.5% of their Net Demand and Time Liabilities (NDTL) under the LAF, using eligible securities in excess of their prescribed SLR as collateral.
Will banks be penalized for SLR shortfall if they use this facility?
No, banks may seek waiver of penal interest for any SLR shortfall arising from availing this facility, purely as an ad hoc measure.
Until when is this additional liquidity support available?
The facility is extended up to July 16, 2010, from its earlier expiry date of July 2, 2010.