RBI extends special liquidity, export credit facilities till June

The Reserve Bank of India (RBI) has extended the special refinance window for banks under the various liquidity enhancing measures up to June 2009. The RBI also made available the first slab of post-shipment rupee export credit and extended the facility for up to 180 days, with effect from 1 December, instead of 90 days at present.

''In view of the difficulties being faced by exporters on account of the weakening of external demand, it has been decided to extend the period of entitlement of the first slab of post-shipment rupee export credit, currently available at a concessional interest rate ceiling of the benchmark prime lending rate (BPLR) minus 2.5 percentage points, from 90 days to 180 days with effect from 1 December 2008,'' the RBI said in a release.

It also decided to extend the scope of special liquidity adjustment facility to include housing finance companies. ''Banks are currently allowed to use up to 1.5 per cent of their bond reserve requirements as collateral at the RBI's repo window to meet the funding needs of mutual funds and non-banking finance companies. The end date for the facility is extended to 30 June 2009,'' it said.

The RBI also extended the availability of a three-month foreign exchange swap facility to meet funding needs of Indian banks' foreign subsidiaries/ branches to 30 June 2009.

On 1 November, the RBI introduced a special refinance facility under which all scheduled commercial banks (excluding RRBs) are provided refinance from the Reserve Bank equivalent to up to 1.0 per cent of each bank's NDTL as of 24 October 2008 at the LAF repo rate up to a maximum period of 90 days.

On 15 October, the RBI allowed banks to avail of liquidity support under the LAF through relaxation in the maintenance of SLR to the extent of up to 1.5 per cent of their NDTL for the purpose of meeting the funding requirements of NBFCs and MFs.

It has now been decided to expand this facility to enable banks to accommodate the funding needs of housing finance companies (HFCs). Banks may apportion the total accommodation allowed above between MFs, NBFCs and HFCs flexibly as per their business needs.

The end date for this facility, which is currently March 31, 2009, has been extended to June 30, 2009.  

On 7 November, in the context of the global developments and in order to provide flexibility to Indian banks in managing their short-term funding requirements at their overseas offices, the RBI decided to provide forex liquidity to Indian public and private sector banks having foreign branches or subsidiaries, through forex swaps of tenors up to three months.

''The moves are part of measures taken since mid-September to ease a credit squeeze and improve lending to boost the economy,'' it said, adding, that as per the measures:

• Refinance facility under which banks can borrow up to the value of 1 per cent of their deposits for up to 90 days will continue till 30 June 2009. 
• Scope of special liquidity adjustment facility to include housing finance companies. 
• Availability of a three-month forex swap facility to meet funding needs of Indian banks' foreign subsidiaries/ branches extended to 30 June 2009.

The measures were announced after the RBI governor D Subbarao met select bankers from the public and the private sector, including foreign banks, to review the current liquidity and credit situation and to get their views on the way forward.

The meeting was held in the RBI central office, Mumbai. Deputy governors Rakesh Mohan, V. Leeladhar and  Usha Thorat and executive director Anand Sinha were present.