What changed
The repo rate under the Liquidity Adjustment Facility (LAF) was increased by 25 basis points from 8.00% to 8.25% with immediate effect. Standing liquidity facilities provided to banks (export credit refinance) and Primary Dealers (collateralised liquidity support) are now priced at the new repo rate of 8.25%.
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 in line with the repo rate hike. This move signals tighter monetary policy, potentially increasing lending rates and reducing liquidity in the banking system.
What you must do
- Review and adjust your bank's funding costs to reflect the higher repo rate on standing liquidity facilities.
- Communicate the revised rate to treasury and credit teams for accurate pricing of loans and advances.
- Assess the impact on export credit refinance availed and plan for any changes in liquidity management.
- Monitor RBI's future policy actions to anticipate further rate adjustments.
Who it affects
All Scheduled Banks (excluding Regional Rural Banks), Primary Dealers, Treasury departments of banks, Export credit borrowers
What is the new repo rate effective from September 16, 2011?
The repo rate under the Liquidity Adjustment Facility (LAF) has been increased by 25 basis points from 8.00% to 8.25% with immediate effect.
How does this affect standing liquidity facilities for banks?
Standing liquidity facilities, including export credit refinance for banks and collateralised liquidity support for Primary Dealers, will now be available at the revised repo rate of 8.25%.
Are Regional Rural Banks (RRBs) covered by this circular?
No, this circular is addressed to all Scheduled Banks excluding Regional Rural Banks (RRBs) and Primary Dealers.