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  1. RBI eases norms for liquidity operations

RBI eases norms for liquidity operations

In a bid to simplify and smoothen liquidity management, the Reserve Bank of India (RBI) will process all bids at its daily fixed repo and reverse repo auctions...

By: | Mumbai | Published: July 28, 2015 12:18 AM

In a bid to simplify and smoothen liquidity management, the Reserve Bank of India (RBI) will process all bids at its daily fixed repo and reverse repo auctions and the Marginal Standing Facility auctions using straight through processing (STP) whereby the bank will get instant credit or debit of funds.

The central bank also said that it would increase the time window for banks to participate at the auctions in the near future to allow more flexibility.

Under STP, the settlement will be automatic and immediate after the placement of bids or offers, the central bank said in a notification on Monday.

STP would be operational August 3 onwards.Currently, banks place bids or offers at the auctions electronically but an element of manual processing is involved in providing collateral and settling the transactions.

The time taken for processing will now be cut down given that the entire process is automatic.

“The time window for availability of the respective facility of fixed rate LAF Repo, fixed rate LAF Reverse Repo and MSF, after the introduction of STP, will be same as hitherto,” the RBI said.

The transactions undertaken by a participant will be final and request for cancellation of bids or offers will not be entertained, the RBI said.

The automation of these facilities will, in no way, affect the discretionary character of these facilities and the Reserve Bank will continue to determine the extent of liquidity injection/absorption depending upon the prevailing liquidity conditions in the system.

The RBI conducts fixed rate repo and reverse repo auctions under the Liquidity Adjustment Facility daily. It also conducts variable rate repos and reverse repos and term repos at regular intervals.

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