What is reverse LAF unit?

A Reverse LAF (Liquidity Adjustment Facility) unit is a monetary policy tool used by central banks to absorb excess liquidity from the banking system. It allows banks to deposit their surplus funds with the central bank for a specified period, typically at a lower interest rate than the market rate. This mechanism helps control inflation and stabilize the economy by managing the money supply. The reverse LAF is particularly important during periods of high liquidity in the financial system.