The Reserve Bank of India (RBI) today allowed regional rural banks (RRBs) to access the liquidity adjustment facility (LAF), marginal standing facility (MSF) and call or notice money market, aimed at facilitating better liquidity management for these lenders. Detailed instructions in this regard will be issued shortly, RBI said.
At present, RRBs are not permitted to access the liquidity windows of the RBI as well as the call or notice market.
Marginal Standing Facility (MSF) is the rate at which the banks are able to borrow overnight funds from RBI.
"In order to facilitate more efficient liquidity management by the RRBs at competitive rates, it has been decided to extend the Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) to RRBs. It has also been decided to permit the RRBs to participate in the Call/Notice money market, both as borrowers and lenders," RBI said.
Experts have welcomed the move. “RBI has assured markets of continued liquidity support while maintaining orderly market conditions. Revision in the On Tap TLTRO scheme and allowing RRBs to participate in LAF are steps that affirm RBI commitment in this direction. The dovish tone of the policy statement has assuaged market fears of an early withdrawal of the post pandemic liquidity support," said Churchil Bhatt, EVP & Debt Fund Manager, Kotak Mahindra Life Insurance Company.
In addition, RBI today proposed to bring the 26 stressed sectors identified by the Kamath Committee within the ambit of sectors eligible under on tap TLTRO.
This is in addition to the five sectors announced under the scheme on October 21, 2020.
The RBI today left the policy repo rate unchanged at 4 per cent. It also maintained an accommodative stance.
