In a release issued on Tuesday, the RBI said that it has already warned banks not to use the RIB funds available for arbitraging between the money and forex markets. "Administrative instructions in this regard have been issued," the RBI said.

The move to provide refinance facilities to banks is to make sure that these banks do not face any liquidity problems in case interest rates move in an adverse direction.

"To ensure that banks investing in such treasury bills or securities do not face unanticipated liquidity problems, the RBI will be providing special liquidity support facility, up to specified amounts for each bank, by way of refinance on the same terms as the general refinancefacility," the RBI said. Refinance under the general refinance facility is linked to the bank rate which is now pegged at 11 per cent.

"Rupee resources received against mobilisation of RIBs can be used by the concerned banks for meeting normal credit requirements, particularly for infrastructure financing. In addition to direct lending, banks may invest in infrastructure bonds being issued by the financial institutions on private placement basis at mutually negotiated terms," the release added.

IDBI and the Infrastructure Developement Finance Corporation will be issuing bonds to these banks at 12.20-12.75 per cent over the weekend. Sources said that about Rs 2,000 crore will be placed with the institutions.

The Reserve Bank has further said that pending the use of the RIB rupee resources for lending or long-term investment, the temporary surpluses can be deployed in treasury bills and dated securities. "For the purpose, the Reserve Bank will be putting treasury bills ranging from 14 days to 364 days asalso dated securities of various maturities, including shorter maturities, on its open-market operations sale list," the RBI said.

The RBI has already swapped about $3.5 billion with the State Bank of India to bring in the forex proceeds of the RIBs. The RIBs issued by the State Bank of India mopped up $4.16 billion. About 80 per cent of the proceeds have been brought into the country. The rupee proceeds will be given to the 14 collecting banks and 20 broking banks in the second week of September. These banks will receive 50 per cent of their collected amounts from State Bank of India. Citibank will be the largest beneficiary, sources said.