Dear Sirs
Standing Liquidity Facilities
for Banks for
Export Credit and Primary Dealers
(PDs): Rationalisation
Please refer to our circular MPD.BC.243/07.01.279/2003-04
dated November 5, 2003 on the captioned subject.
2. At present, banks are eligible
for standing liquidity facility (export credit eligible for refinance), and
Primary Dealers (PDs) are eligible for collateralised liquidity support from
RBI subject to certain limits. These limits are apportioned into normal facility
constituting one-third of the total entitlement available at the Bank Rate and
back-stop facility constituting the remaining two-thirds available at the back-stop
rate/reverse repo rate.
3. In order to rationalise the
existing structure of liquidity support from the Reserve Bank, it has been decided
that, as recommended by the Internal Group on Liquidity Adjustment Facility
(LAF) and suggested by market participants, the entire amount of support under
the Standing Liquidity Facilities would be made available at a single rate.
Accordingly, it has been decided to merge the normal facility and back-stop
facility into a single facility to be made available at a single rate, viz.,
at the reverse repo rate with effect from March 29, 2004.
4. Currently, the Bank Rate
is at 6.0 per cent and the reverse repo rate is at 6.5 per cent. In the light
of the revised LAF Scheme, the reverse repo rate stands reduced to 6.0 per cent
with effect from March 29, 2004. This would result in a reduction of part of
cost of funds for banks and PDs.
5. Kindly acknowledge receipt.