Putting liquidity in its place.

from BUSINESS LINE, March 24, 2011 The Working Group on Operating Procedure of Monetary Policy should be congratulated for bringing out a well-articulated report reviewing the Liquidity Adjustment Facility (LAF). While I agree broadly with the findings and recommendations of the Group, I have a few comments to make.In the first place, as a formal document, the report could have recapitulated the objectives of the LAF to make it clear that it is intended to solve problems of temporary mismatches in the financial flows of the system and not for meeting the requirements of the regular business of banks. It would have helped the reader, had there been a discussion on the measurement of 'liquidity' reported to be done in the RBI.

Discussing LAF without this definition is like holding a baraat without the …