The Reserve Bank of India on Friday extended its special measures for easing the money supply till May 6 in view of the current liquidity situation.
The special liquidity management measures, that were to end on Friday, have been extended by nearly a month even though the credit offtake is generally low in the first quarter of a financial year.
As far as liquidity in the system is concerned bankers are of the view that it has improved substantially compared to December last year.
On the basis of an assessment of the current liquidity situation, it has been decided to extend liquidity management measures, now set to expire on April 8, the RBI said in a statement.
Banks are allowed to avail themselves of additional liquidity support under the Liquidity Adjustment Facility to the extent of up to one per cent of their total deposits. This facility is now extended up to May 6.
“For any shortfall in maintenance of the Statutory Liquidity Ratio (SLR) arising out of availment of this facility, banks may seek waiver of penal interest on a fortnightly basis purely as an ad hoc, temporary measure,” the statement said.
Second LAF
Besides, the second LAF will be conducted on a daily basis till the extended period.
The facilities will be reviewed once a view is taken on the recommendations of the report of the working group on operating procedure of monetary policy headed by Executive Director Deepak Mohanty.
The panel has suggested that the short-term lending rate (repo) be made the single policy rate to signal the monetary policy stance, to effectively deal with inflation without hurting growth. At present, there are three rates — repo, reverse repo and Bank Rate — through which the RBI injects or absorbs liquidity from the system.
The proposal is aimed at aligning the Indian monetary system with international best practices.
