What changed
Earlier, banks could avail additional LAF support up to 1% of NDTL till December 16, 2010. Now, the limit is doubled to 2% of NDTL, and the window is extended to January 28, 2011. The waiver of penal interest for SLR shortfalls is now available on a fortnightly basis instead of a one-time waiver.
What it means for you
This gives banks more room to manage liquidity pressures without incurring penalties for SLR non-compliance. The higher limit and extended timeline indicate RBI's intent to ease systemic stress. Banks must report daily usage of this facility, adding to operational tracking.
What you must do
- Update your LAF borrowing limits to reflect the new 2% of NDTL cap.
- Ensure daily reporting of liquidity support availed under this facility.
- Apply for penal interest waiver on a fortnightly basis for any SLR shortfall arising from this support.
- Monitor NDTL figures as of the reporting Friday of the second preceding fortnight for accurate limit calculation.
Who it affects
All scheduled commercial banks, Treasury and ALM teams, Compliance and reporting departments
What is the new limit for additional LAF liquidity support?
The limit is increased to 2% of NDTL, up from the earlier 1%.
Until when is this facility available?
The facility is available with immediate effect up to January 28, 2011.
How do we get penal interest waiver for SLR shortfall?
Banks can seek waiver on a fortnightly basis as an ad hoc temporary measure for shortfalls arising from this facility.