What changed
The repo rate under the Liquidity Adjustment Facility was increased by 25 basis points from 6.0% to 6.25% with immediate effect. Consequently, the standing liquidity facilities provided to banks and Primary Dealers will now be available at the revised repo rate of 6.25%.
What it means for you
Banks and Primary Dealers will face higher costs for accessing standing liquidity from the RBI, as the rate for export credit refinance and collateralised liquidity support has risen. This move signals tighter monetary policy, potentially leading to higher lending rates and reduced liquidity in the banking system.
What you must do
- Review your bank's reliance on standing liquidity facilities and assess the impact of the 25 bps rate hike on funding costs.
- Communicate the revised repo rate to treasury and ALM teams to adjust liquidity management strategies.
- Evaluate the pass-through of higher costs to lending rates, especially for export credit linked to refinance.
- Monitor RBI's future policy signals to anticipate further rate changes.
Who it affects
All scheduled banks (excluding RRBs), Primary Dealers, Banks availing export credit refinance, Treasury and ALM departments
What is the new repo rate effective from November 2, 2010?
The repo rate was increased by 25 basis points from 6.0% to 6.25% with immediate effect.
Which standing liquidity facilities are impacted by this change?
The standing liquidity facilities for banks (export credit refinance) and Primary Dealers (collateralised liquidity support) are now available at the revised repo rate of 6.25%.
Are Regional Rural Banks (RRBs) affected by this circular?
No, the circular explicitly excludes Regional Rural Banks (RRBs) from its scope.