RBI plans frequent term repo auctions for better liquidity
23 Aug 2014 5:41 AM IST
The Reserve Bank of India on Friday said it would conduct more frequent term repos auctions in order to make borrowing more flexible to meet the liquidity needs. ‘With a view to ensuring flexibility and transparency in liquidity management operations, a revised framework for liquidity management is being put in place with effect from 5 September, 2014,’ RBI said in a statement.
On 5 September, RBI would conduct 14-day term repo auction for an amount equivalent to one-fourth of 0.75 per cent of net demand and time liabilities (NDTL), it said. There will be four-day term repo auction for an amount equivalent to three-fourth of 0.75 per cent of NDTL, it added.
There will be regular rollovers of maturing 14-day term repos on every Tuesday and Friday, it said. However, overall borrowing limit for banks have been retained for liquidity adjustment facility (LAF).
Banks are currently allowed to borrow up to 0.25 per cent of NDTL from the LAF window. Under the existing arrangements, day-to-day liquidity requirements are met through variable rate 14-day, 7-day repo auctions equivalent to 0.75 per cent of NDTL of the banking system.
Banks are also allowed to raise through overnight auction of repo at fixed rate that is the repo rate of 8 per cent. A bank is not allowed to borrow more than 0.25 per cent of its NDTL.
Meanwhile, the Reserve Bank has sought comments from the public on its ‘Draft Charter on Customer Rights’ related to transparency, privacy and right to grievance, among others.
RBI said the specific and actionable comments may be emailed or sent by post on or before 22
September, 2014.
On 5 September, RBI would conduct 14-day term repo auction for an amount equivalent to one-fourth of 0.75 per cent of net demand and time liabilities (NDTL), it said. There will be four-day term repo auction for an amount equivalent to three-fourth of 0.75 per cent of NDTL, it added.
There will be regular rollovers of maturing 14-day term repos on every Tuesday and Friday, it said. However, overall borrowing limit for banks have been retained for liquidity adjustment facility (LAF).
Banks are currently allowed to borrow up to 0.25 per cent of NDTL from the LAF window. Under the existing arrangements, day-to-day liquidity requirements are met through variable rate 14-day, 7-day repo auctions equivalent to 0.75 per cent of NDTL of the banking system.
Banks are also allowed to raise through overnight auction of repo at fixed rate that is the repo rate of 8 per cent. A bank is not allowed to borrow more than 0.25 per cent of its NDTL.
Meanwhile, the Reserve Bank has sought comments from the public on its ‘Draft Charter on Customer Rights’ related to transparency, privacy and right to grievance, among others.
RBI said the specific and actionable comments may be emailed or sent by post on or before 22
September, 2014.
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