What changed
RBI announced a special fixed rate term repo at 9% per annum for a notified amount of Rs 20,000 crore on October 14, 2008, to address mutual fund liquidity. Banks utilized only Rs 3,500 crore of this facility on the first day. Going forward, this repo will be conducted daily until further notice, with the residual amount notified each day. Allocations will be on a pro-rata basis if bids exceed the notified amount.
What it means for you
This provides banks with a dedicated, low-cost funding window at 9% to channel liquidity to mutual funds, easing redemption pressures. It supplements the regular LAF and SLAF operations, offering additional flexibility. Banks can use this to manage short-term liquidity mismatches without disrupting regular repo auctions. The daily auction ensures ongoing access, but the cumulative cap of Rs 20,000 crore limits total exposure.
What you must do
- Submit applications electronically via NDS between 2:30 PM and 3:15 PM on auction days.
- Monitor daily RBI press releases for cumulative utilization, notified amount, and tenor.
- Ensure settlement for special repo is done separately on a gross basis.
- Integrate this facility into your liquidity management strategy for mutual fund support.
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 against eligible securities.
How much can we borrow under this facility?
The cumulative amount is capped at Rs 20,000 crore. Daily notified amounts will be the residual balance, and allocations are pro-rata if bids exceed the notified amount.
Does this replace the regular LAF and SLAF auctions?
No, this special repo is in addition to the regular LAF and SLAF auctions, which will continue as usual.