What changed
The fixed repo rate under the Liquidity Adjustment Facility (LAF) was revised upward to 8.50% with immediate effect. Consequently, the Standing Liquidity Facilities—export credit refinance for banks and collateralised liquidity support for Primary Dealers—will be priced at the new repo rate from June 25, 2008.
What it means for you
Banks and Primary Dealers will face higher borrowing costs for these specific liquidity windows, as the rate aligns with the revised repo rate. This move signals tighter monetary conditions, potentially increasing banks' funding costs for export credit and requiring PDs to reassess their liquidity management strategies.
What you must do
- Review your bank's export credit refinance outstanding and recalculate interest costs at the new 8.50% rate.
- Update internal pricing models for loans linked to export credit refinance to reflect the higher cost.
- Communicate the rate change to treasury and credit teams for liquidity planning.
- Monitor LAF operations closely for any further rate adjustments.
Who it affects
All Scheduled Banks (excluding RRBs) availing export credit refinance, Primary Dealers using collateralised liquidity support
When does the new 8.50% rate take effect?
The revised repo rate of 8.50% is effective from June 25, 2008, as per the circular dated June 24, 2008.
Does this change affect all LAF operations?
The circular specifically applies to Standing Liquidity Facilities—export credit refinance for banks and collateralised liquidity support for PDs—aligning them with the new repo rate.