What changed
The repo rate under the Liquidity Adjustment Facility (LAF) was increased by 25 basis points from 6.25% to 6.50% with immediate effect. As a result, the standing liquidity facilities provided to banks (export credit refinance) and Primary Dealers (collateralised liquidity support) are now available at the revised repo rate of 6.50%.
What it means for you
Banks and Primary Dealers will face higher costs for accessing these specific liquidity windows from RBI, directly impacting their funding expenses. This rate hike signals RBI's tightening stance to manage inflation, and banks may need to reassess their liquidity management and lending rates accordingly.
What you must do
- Update internal systems to reflect the new repo rate of 6.50% for standing liquidity facilities.
- Review the impact on export credit refinance costs and adjust pricing for export loans if necessary.
- Communicate the rate change to treasury and ALM teams to recalibrate liquidity and funding strategies.
- Monitor RBI's future policy actions for further rate adjustments.
Who it affects
All Scheduled Banks (excluding RRBs), Primary Dealers, Treasury and ALM departments, Export credit borrowers
What is the new repo rate effective from January 25, 2011?
The repo rate under LAF has been increased by 25 basis points to 6.50% with immediate effect.
Which liquidity facilities are impacted by this change?
The standing liquidity facilities for banks (export credit refinance) and Primary Dealers (collateralised liquidity support) are now priced at the revised repo rate of 6.50%.
Are Regional Rural Banks (RRBs) affected by this circular?
No, the circular explicitly excludes RRBs from its scope.