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RBI/2006-2007/238
FMD.No.11/01.01.01/2006-07
January 31,
2007
All Scheduled Commercial
Banks (excluding RRBs) and Primary Dealers
Dear Sir,
Liquidity
Adjustment Facility – Repo and Reverse Repo Rates
Please refer
to paragraphs 93 and 94 of the ‘Third
Quarter Review of Annual Statement on Monetary Policy for the year 2006-07’
dated January 31, 2007 and our circular FMD.No.10/01.01.01/2006-07
dated October 31, 2006.
2. In view
of the current macroeconomic and overall monetary conditions, it has been decided,
to increase the fixed repo rate under the liquidity adjustment facility
(LAF) of the Reserve Bank by 25 basis points with effect from Second LAF
of January 31, 2007 to 7.50 per cent from 7.25 per cent. The reverse
repo rate under the LAF remains unchanged at 6.00 per cent. All other terms
and conditions of the current LAF Scheme will remain unchanged.
3. Your
attention is also drawn to para 95 where it is reiterated that the Reserve Bank
retains the option to conduct overnight repo or longer term repo under the LAF
depending on market conditions and other relevant factors. The Reserve Bank
will continue to use this flexibility including the right to accept or reject
tender(s) under the LAF, wholly or partially, if deemed fit, so as to make efficient
use of the LAF in daily liquidity management
Yours
faithfully
(Chandan
Sinha)
Chief General Manager
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