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RBI to stop announcing back-stop fund rate

The Reserve Bank of India said that from Tuesday it would discontinue announcing the rate at which it extends refinance under its back-stop facility, which is not being extensively used.

Those who want to use the facility will have to get in touch with the central bank, the RBI said on Monday.

The central bank also said it would, until further notice, continue to hold multiple price repo and reverse repo auctions under its Liquidity Adjustment Facility started on May 8.

The multiple price repo auction system replaced the uniform price method.

"The experience has been that the back-stop facility, as was intended, is being used sparingly," the RBI said in a statement.

The Monetary and Credit Policy for 2001-02 (April-March), announced in April, introduced the multiple price system and split central bank refinance into normal and back-stop facilities.

One-third of central bank refinance is extended under the back-stop facility.

The back-stop rate is one percentage point over the reverse repo cut-off rate or 2-3 points over the repo cut-off rate.

On days when repo auctions are not held, the back-stop rate is between 1-3 points above the National Stock Exchange's Mumbai Inter-Bank Offered Rate.

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