What changed
RBI extended Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) to Scheduled Regional Rural Banks (RRBs) meeting specific criteria. Eligible RRBs must have implemented Core Banking Solution (CBS), maintain a minimum CRAR of 9%, and fully comply with FMOD terms. RBI will issue a positive list of eligible banks and a negative list of ineligible ones, with ongoing review of eligibility.
What it means for you
This gives RRBs a new tool for managing short-term liquidity, reducing their reliance on informal or costly sources. Banks that meet the criteria can now access repo and MSF windows, improving their ability to handle cash flow mismatches. Lenders should prepare to meet the compliance requirements to avoid being on the negative list.
What you must do
- Ensure your RRB has implemented CBS and maintains CRAR above 9%.
- Review and comply with all FMOD terms and conditions for LAF/MSF.
- Monitor RBI communications for the positive/negative list and effective date.
- Prepare internal liquidity management processes to utilize LAF/MSF once eligible.
Who it affects
Scheduled Regional Rural Banks (RRBs), RBI Financial Markets Operations Department (FMOD), RRB treasury and compliance teams
What are the key eligibility criteria for RRBs to access LAF and MSF?
RRBs must have implemented Core Banking Solution (CBS), maintain a minimum CRAR of 9%, and be fully compliant with FMOD terms and conditions.
How will RBI communicate which RRBs are eligible?
RBI will issue a positive list of eligible banks and a negative list of ineligible ones, with ongoing review of eligibility status.
When will RRBs be able to start using LAF and MSF?
The effective date for eligibility will be communicated separately by RBI.