Liquidity Adjustment Facility

RBI has decided to extend liquidity adjustment facility (LAF) to Regional Rural Banks (RRB) to make liquidity management more efficient. The LAF was introduced in RBI in 1998 based on the recommendations of Narasimham Committee on Banking Sector Reforms. It is a monetary policy tool that enables banks to resolve temporary cash shortages through repurchase agreements or repos. It can also make loans to RBI through reverse-repos to raise cash.