The Federal Reserve is reducing the maximum maturity of primary credit loans at the discount window for depository institutions to 28 days from 90 days, effective January 14, 2010.

The announcement from the U.S. central bank comes in light of “the continued improvement in financial market conditions,” the Fed said today.

Institutions will be allowed to renew primary credit loans, the Fed noted.

The Fed noted that before August 2007, the maximum available term of primary credit was overnight and was eventually extended to 90 days on March 16 of 2008.

The Fed loosened monetary policy as financial markets came under stress at the beginning of the economic crisis triggered in part by falling home prices in the second half of 2007.