The Reserve Bank of India is planning to charge 4% over the reverse repo rate for emergency funds drawn by banks.
"In some very rare and unusual circumstances, a situation may arise when a bank faces a sudden and unforeseen liquidity problem, particularly outside the normal LAF auction timings and on days on which such auctions are not held."
"In such exceptional and unforeseen circumstances, RBI, at its discretion, may extend liquidity support to such a bank if the said bank is otherwise financially sound, and after taking into account other relevant factors," the statement said.
"The liquidity support in such exceptional circumstances will be made available only for a minimum number of days required to overcome the unexpected liquidity pressure."
"As this exceptional financing has to be availed only in rare circumstances, an interest rate of 4% above the reverse repo rate prevailing on that day (or a rate as may be decided by RBI) will be charged," the statement said.
Such liquidity support, the announcement added, will be available only against eligible securities with adequate margin and other conditions as RBI may consider appropriate.
More from rediff