BackRBI changes LAF frequency to once a day
RBI changes LAF frequency to once a day
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Mumbai: The Reserve Bank of India (RBI) on Tuesday said it will conduct its liquidity adjustment facility (LAF), through which it injects to or sucks out liquidity from the system, only once in a day instead of two times from Wednesday.
The central bank of the country started conducting LAF twice a day since mid-September last year to help banks borrow money to tide over their temporary liquidity needs.
In September itself, banks had borrowed in excess of Rs90,000 crore from RBI. However, the situation reversed completely after RBI pumped in more than Rs3 trillion in the system through its monetary easing policies.
Flushed with liquidity now, banks have parked in excess of Rs1 trillion with the central bank since April. On Tuesday, banks parked about Rs1.45 trillion with RBI through two LAFs. The amount would have been more but RBI rejected bids of Rs7,258 crore.
However, the second LAF will be done on reporting Fridays or every alternate Friday when banks have to maintain their cash balance with the central bank. Banks are required to maintain 5% of their deposits in cash with RBI every alternate Friday.
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