What changed
RBI introduced a one-time special fixed rate repo of Rs.20,000 crore at 9% per annum, specifically to ease liquidity pressures on mutual funds. The facility is open to scheduled commercial banks (excluding RRBs) and primary dealers, with bids via NDS from 2:30 PM to 3:15 PM on October 14, 2008. Settlement is separate and on a gross basis, with pro-rata allocation if oversubscribed.
What it means for you
This targeted repo injection provides banks with cheap, assured liquidity to on-lend to mutual funds, addressing a specific stress point in the financial system. For lenders, it offers a temporary funding buffer at a fixed rate, but the 15-day tenor requires careful cash flow planning. The move signals RBI's willingness to use unconventional tools to stabilize markets during the 2008 crisis.
What you must do
- Submit bids electronically via NDS between 2:30 PM and 3:15 PM on October 14, 2008, if you need liquidity for mutual fund support.
- Ensure eligible securities are available for collateral as per standard LAF terms.
- Prepare for separate gross settlement of this repo, distinct from regular LAF operations.
- Monitor pro-rata allocation risk if total bids exceed Rs.20,000 crore.
Who it affects
All scheduled commercial banks (excluding RRBs), Primary dealers, Mutual funds (indirectly through bank lending)
What is the interest rate for this special repo?
The special fixed rate repo is offered at 9% per annum, as announced by RBI.
When will this repo be reversed?
The reversal is scheduled for Wednesday, October 29, 2008.
Can RRBs participate in this facility?
No, RRBs are explicitly excluded from this special repo; only scheduled commercial banks (excluding RRBs) and primary dealers are eligible.