RBI introduces Straight Through Processing of fixed rate LAF and MSF operations

To smoothen liquidity management operations, the Reserve Bank of India has decided to introduce Straight Through Processing (STP) in fixed rate LAF Repo, fixed rate LAF Reverse Repo and MSF operations.

This will enable eligible participants to receive the credit or debit immediately on placement of the bids or offers, subject to the availability of the collateral or funds, within the prescribed time window.

There will be no change in the process of placing bids/offers by the eligible participants. The STP will be introduced with effect from August 3.

Eligible participants can, as hitherto, place multiple bids/offers in the respective liquidity facilities. Settlement of the transaction will be automatic and immediate after the placement of the bid/offer.

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

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 timings for the LAF and MSF windows will be extended for a longer duration in near future to give eligible participants more flexibility to operate these windows.

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 other terms and conditions for LAF and MSF will remain unchanged.