What changed
The earlier circular (December 16, 2010) allowed additional LAF support up to 1% of NDTL until January 28, 2011. This circular extends that deadline to April 8, 2011, following the Third Quarter Review of Monetary Policy 2010-11. The waiver of penal interest for SLR shortfalls remains available as an ad hoc, temporary measure.
What it means for you
Banks can continue to access extra liquidity from RBI under LAF without immediately worrying about SLR compliance penalties. This gives lenders more breathing room to manage short-term liquidity pressures without breaching regulatory norms. However, the facility is temporary and requires daily reporting of availed liquidity support.
What you must do
- Ensure daily reporting of liquidity support availed under this facility to RBI.
- Apply for waiver of penal interest on a fortnightly basis for any SLR shortfall arising from this support.
- Monitor SLR positions closely to avoid exceeding the 1% NDTL limit for additional LAF support.
- Prepare for the expiry of this facility on April 8, 2011, and plan liquidity accordingly.
Who it affects
All Scheduled Commercial Banks, Treasury and ALM teams, Compliance departments handling SLR reporting
What is the maximum additional liquidity I can avail under this facility?
Up to 1% of your bank's Net Demand and Time Liabilities (NDTL).
Do I need to pay penal interest if my SLR falls short due to this support?
No, you can seek a waiver of penal interest on a fortnightly basis, as an ad hoc and temporary measure.
How long is this extension valid?
The facility is extended from January 28, 2011, to April 8, 2011.