What changed
The fixed repo rate under the Liquidity Adjustment Facility was increased by 50 basis points from 8.5% to 9.0%, effective immediately from July 29, 2008. As a result, the standing liquidity facilities provided to banks (export credit refinance) and Primary Dealers (collateralised liquidity support) are now priced at the revised repo rate of 9.0%.
What it means for you
Banks and Primary Dealers will face higher borrowing costs for these specific liquidity windows, directly impacting their cost of funds. This move signals tighter monetary policy aimed at controlling inflation, and lenders may need to reassess their liquidity management and lending rates accordingly.
What you must do
- Update internal pricing models to reflect the new 9.0% rate for export credit refinance and collateralised liquidity support.
- Review liquidity contingency plans to account for the increased cost of accessing these standing facilities.
- Communicate the rate change to treasury and credit teams to align funding strategies.
- Assess the impact on net interest margins and adjust lending or investment strategies if needed.
Who it affects
All Scheduled Banks (excluding Regional Rural Banks), Primary Dealers
What is the new repo rate effective from July 29, 2008?
The fixed repo rate under the Liquidity Adjustment Facility has been increased by 50 basis points to 9.0%.
Which standing liquidity facilities are impacted by this change?
The standing liquidity facilities for banks (export credit refinance) and for Primary Dealers (collateralised liquidity support) are now available at the revised repo rate of 9.0%.
Are Regional Rural Banks affected by this circular?
No, the circular explicitly excludes Regional Rural Banks (RRBs) from its scope.