What changed
RBI announced a new 28-day special term repo auction facility, with a notified amount capped at 0.25% of the banking system's net demand and time liabilities (NDTL). These auctions will typically be held on non-reporting Fridays, with the first one scheduled for June 6, 2014. The auctions follow the revised Term Repo guidelines issued on February 13, 2014.
What it means for you
Banks gain a new avenue to access short-term liquidity from RBI for a 28-day period, which can help manage temporary fund mismatches more flexibly. The cap at 0.25% of NDTL ensures the facility is used for fine-tuning rather than large-scale borrowing. Scheduled commercial banks (excluding RRBs) should factor this into their liquidity planning and auction participation strategies.
What you must do
- Review your bank's NDTL to estimate eligible borrowing under the 0.25% cap.
- Prepare to participate in the first auction on June 6, 2014, and subsequent non-reporting Friday auctions.
- Update internal liquidity management and treasury operations to incorporate this new 28-day repo window.
- Ensure compliance with the revised Term Repo guidelines issued on February 13, 2014.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Bank treasury and liquidity management teams, RBI's monetary operations division
What is the maximum amount a bank can borrow in these special term repo auctions?
The total notified amount for each auction is up to 0.25% of the net demand and time liabilities (NDTL) of the entire banking system, not per bank. Individual bank participation will depend on the auction mechanism.
When will these auctions be conducted?
The auctions will usually be held on non-reporting Fridays. The first auction is scheduled for June 6, 2014.
Which banks are eligible to participate?
All Scheduled Commercial Banks are eligible, except Regional Rural Banks (RRBs).