What changed
The overall LAF allocation is now limited to 1% of the banking system's Net Demand and Time Liabilities, set at ₹75,000 crore. Individual banks get funds in proportion to their bids, subject to this ceiling. The cap applies to both morning and additional repo auctions together; if the morning auction uses the full ₹75,000 crore, no evening repo auction will be held.
What it means for you
Banks face tighter liquidity access as the total LAF borrowing is capped, potentially increasing short-term funding costs. Proportional allocation may lead to smaller allotments for individual bidders if aggregate demand exceeds the ceiling. The combined cap on morning and additional repo auctions reduces flexibility on reporting Fridays.
What you must do
- Ensure sufficient eligible collateral securities are in your RC account before bid submission.
- Adjust liquidity planning to account for the combined ₹75,000 crore cap across morning and additional repo auctions.
- Monitor bid amounts to avoid exceeding the proportional allocation limit.
- Prepare for possible absence of evening repo auction if morning auction exhausts the cap.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Standalone Primary Dealers
What is the new LAF allocation limit?
The overall allocation under LAF is capped at 1% of the banking system's Net Demand and Time Liabilities, which is set at ₹75,000 crore for this purpose.
How will individual bank allocation be determined?
Allocation to each bank will be made in proportion to its bid amount, subject to the overall ceiling of ₹75,000 crore.
Does the cap apply to both morning and additional repo auctions?
Yes, the ₹75,000 crore cap applies to the combined allocation from morning and additional LAF repo auctions. If the morning auction uses the full amount, no evening repo auction will be conducted.