The bank will park another two tranches of Rs 300 crore each with the Infrastructure Development Finance Company (IDFC) and Housing and Urban Development Corporation (Hudco) in the next few days. The funds will carry an identical coupon and maturity, sources said. The funds that will flow to Hudco will be used to develop the housing sector, sources said.

This is in line with the Reserve Bank's instructions to the State Bank to place the money raised through the RIB with financial institutions so that this money does not flow into the money markets and cause volatility. No other financial institution will receive anymore RIB proceeds, sources said. Institutional sources said that they will not cut their prime lending rate following the placement ofRIB funds with them. "Spreads will be protected and we will not cut PLRs," an institutional source said.

The RBI has already decided that it will be providing special liquidity support to collecting banks of RIBs against the collateral of short-term securities acquired by these banks from open market operations sale list. This measure is a temporary one and will be valid up to March 31, 1999

The move to provide refinance facilities to banks is to make sure that these banks do not face any liquidity problems in case interest rates move in an adverse direction.

The Reserve Bank has further said that pending the use of RIB rupee resources for lending or long-term investment, the temporary surpluses can be deployed in treasury bills and dated securities.

The RBI has already swapped about $3.5 billion with the State Bank to bring in the forex proceeds of RIBs. The RIBs had mopped up $ 4.16 billion. About 80 per cent of the proceeds have been brought into the country. The rupee proceeds will be given to the14 collecting banks and 20 broking banks in the second week of September.