RBI extends special borrowing facility till 6 May

RBI extends special borrowing facility till 6 May

Mumbai: The Reserve Bank of India (RBI) on Friday extended its special borrowing facility for banks till 6 May-the sixth time since it was introduced in October. Under the facility banks can borrow up to 1% of their deposits without paying any penal interest if there is a shortfall on their statutory liquidity ratio (SLR).

SLR is the minimum percentage of deposits that have to invested into government securities as specified by the RBI. Currently, banks have to invest 24% of their deposits into securities.

Banks can also continue to borrow through a second repo auction untill 6 May. This facility was also due to expire on Friday.

RBI lends to banks at the repo rate in exchange for securities. The repo rate currently stands at 6.75%.

These measures were first introduced as a temporary relief for banks because these lenders were borrowing more than a trillion rupees daily from the RBI after telecom companies borrowed huge sums to pay for third generation mobile spectrum auctions.

Friday was supposed to be the last day for the measures.

Interestingly, the RBi still called these measures as “ad hoc" .

“These facilities will be reviewed once a view is taken on the recommendations of report of the working group on operating procedure of monetary policy," RBI said.