Discount window policy
discount window policy
All banks that hold reserve accounts with the Bank can have an access to the discount window in the following ways:
A bank may apply for discounts by sending the eligible bills to the Bank to secure the loan. Eligible bills banker's acceptances, trade acceptances, and promissory notes collateralized against Treasury bills or government bonds.
To make up for a reserve deficiency, a bank may apply for short-term accommodation by drawing promissory notes payable to the Bank. The promissory note should be secured by adequate collateral, either bills eligible for discounts, or securities consented by the Bank. Banks may also borrow without collateral, but at a higher lending rate. short-term accommodations may be provided for a maximum of 10 days and should not exceed 10 percent of the borrowing bank's required reserves. If the amount requested exceeds this percentage, the interest rate on the accommodations will be 1.2 times the rate posted by the Bank. In addition, if the bank borrows for three 10-day periods in a row, then the interest rate will also be 1.2 times the posted rate.