**Summary:**
This policy, RBI/2019-20/115 FMOD.MAOG.No.138/01.01.001/2019-20, issued on December 13, 2019, by the Reserve Bank of India (RBI), introduces a Liquidity Support (LS) facility to facilitate smooth settlement of National Electronic Funds Transfer (NEFT) transactions in a 24x7 environment.
The LS facility is an additional collateralized intraday liquidity facility available to member banks participating in the NEFT payment system. Key features of the scheme are:
* **Availability:** The LS facility is available on a 24x7 basis for NEFT settlements.
* **Terms and Conditions:** It operates under the same terms and conditions as the existing IntraDay Liquidity (IDL) facility.
* **Eligibility:** All member banks eligible for the IDL facility are also eligible for the LS facility.
* **Limit:** The limit for the LS facility will be determined by the Reserve Bank from time to time and drawings under LS will be part of the eligible IDL limit.
* **Margin Requirement:** The margin requirement for the LS facility is similar to that of the IDL facility.
* **Conversion to MSF:** Outstanding drawings at the end of the day under the LS facility will be automatically converted into borrowing under the Marginal Standing Facility (MSF). The MSF reversal will occur along with other Liquidity Adjustment Facility (LAF) operations.
* **Existing Instructions:** Extant instructions on intraday liquidity and reversal of IDL shall continue.
* **Review:** The Reserve Bank reserves the right to review the facilities based on operational experience.
For further information, contact Radha Shyam Ratho, Chief General Manager.
Key Entities Referenced
NEFT payment system: National Electronic Funds Transfer payment system, used by member banks.
Reserve Bank: Central bank responsible for setting the limit for the Liquidity Support (LS) facility.
Liquidity Support LS Facility: An additional collateralised intraday liquidity facility to facilitate smooth settlement of NEFT transactions.
IntraDay Liquidity IDL facility: Existing facility with the same terms and conditions as the new Liquidity Support (LS) facility.
Marginal Standing Facility MSF: Facility under which outstanding drawings at the end of the day under the LS facility will be automatically converted into borrowing.
LAF operations: Liquidity Adjustment Facility operations, related to the reversal of MSF borrowing.
Radha Shyam Ratho: Chief General Manager at Reserve Bank.
October 4, 2019: Date of the Statement on Developmental and Regulatory Policies, which announced the Liquidity Support (LS) facility.
RBI/2019-20/115
FMOD.MAOG.No.138/01.01.001/2019-20 December 13, 2019
The Chairman / Managing Director / Chief Executive Officers
of member banks participating in NEFT payment system
Madam / Dear Sir
Liquidity Support (LS) Facility - NEFT 24 x 7
As announced in the Statement on Developmental and Regulatory Policies dated
October 4, 2019, in order to facilitate smooth settlement of NEFT transactions in the
accounts of the member banks maintained with the Reserve Bank in a 24x7
environment, it has been decided to provide an additional collateralised intra-day
liquidity facility, to be called Liquidity Support (LS).
2. The salient features of the scheme are as under:
a) LS facility will be available for facilitating NEFT settlements, on 24x7 basis. The LS
facility will operate as per the same terms and conditions as the Intra-Day Liquidity
(IDL) facility.
b) All member banks eligible for the IDL facility will be eligible to avail of the LS facility.
c) The limit for LS facility would be set by the Reserve Bank from time to time.
Drawings under the LS facility shall be reckoned as part of the eligible IDL limit.
d) The margin requirement on LS facility would be similar to that of IDL facility.
e) Outstanding drawing at the end of the day under the LS facility will be automatically
converted into borrowing under the Marginal Standing Facility (MSF).
f) The above MSF borrowing reversal will take place along with other LAF operations
as is currently being done.g) The extant instructions on intra-day-liquidity and reversal of IDL shall continue, as
hitherto.
h) The Reserve Bank may review the facilities based on the experience gained in
operationalizing the scheme.
Yours faithfully
(Radha Shyam Ratho)
Chief General Manager