July
31, 2008
All Scheduled Commercial Banks (excluding RRBs) and Primary
Dealers
Dear Sir,
SECOND Liquidity Adjustment
Facility on Reporting Fridays
At present, Reserve
Bank of India operates a Liquidity Adjustment Facility (LAF) to inject/absorb
liquidity through daily repos/reverse repos auctions. These operations are conducted
in the forenoon between 9.30 A.M. and 10.30 A.M.
2. In
response to suggestions from the market participants for fine-tuning the management
of bank reserves on the last day of the maintenance period, it has been decided
to introduce a second LAF (SLAF) on reporting Fridays, with effect from August
1, 2008. SLAF will be conducted between 4.00 P.M. and 4.30 P.M. The auction results
will be announced by 5.00 P.M.
3. In case the reporting
Friday is a Bank holiday in Mumbai, then the SLAF would be conducted on the immediate
preceding working day.
4. The salient features of the SLAF
are same as those of LAF. However, the settlement for LAF and SLAF will be conducted
separately and on a gross basis.
5. The other terms and
conditions for LAF remain as notified by our earlier circulars: IDMD.OMO.No.8/03.75.00/2004-05
dated October 27, 2004, FMD.MOAG.No.4
/01.01.01/2005-06 dated February 10, 2006, and FMD.MOAG.
No.13/01.01.01/2006-07 dated March 30, 2007.
6. SLAF
will be subject to review and modifications as necessary, based on experience.
7.
Please acknowledge receipt by e-mail.
Yours
faithfully
(Chandan Sinha)
Chief General Manager