RBI Launches Daily Special Fixed Rate Repo for Mutual Fund Liquidity
Current · Source: Reserve Bank of India · RBI/2008-09/224 · issued 15 Oct 2008 · ~2 min read
Quick answerRBI introduces a daily special fixed rate repo at 9% per annum, up to a cumulative Rs 20,000 crore, to help banks meet mutual funds' liquidity needs. Banks used Rs 3,500 crore on day one. Auctions run daily until further notice.
The rule, in the simplest words
RBI (the central bank) gives banks a special loan every day at 9% interest, up to a total of Rs 20,000 crore, so banks can lend money to mutual funds (investment pools).
Banks must apply for this loan online between 2:30 PM and 3:15 PM on auction days.
If too many banks ask for money, RBI splits the available amount fairly (pro-rata) among them.
The loan is separate from regular bank loans and must be paid back separately (gross settlement).
RBI tells banks each day how much of the Rs 20,000 crore has been used and how much is left for the next day.
How it plays out — a real example
A branch operations officer in Indore sees that a local mutual fund needs cash to pay investors who are withdrawing money. She uses the special repo facility to borrow Rs 10 crore from RBI at 9% interest, then lends that money to the mutual fund, helping it meet redemptions without stress.
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)
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2008-09/224
FMD.MOAG. No. 27/01.01.01/2008-09
October 15, 2008
All Scheduled Commercial Banks (excluding RRBs)
and Primary Dealers
Dear Sir,
SPECIAL FIXED RATE REPO UNDER
LIQUIDITY ADJUSTMENT FACILITY
The Reserve Bank announced and conducted a special fixed rate term repo at 9 per cent per annum against eligible securities for a notified amount of Rs.20,000 crore on October 14, 2008, with a view to enabling banks to meet the liquidity requirements of mutual funds. Banks utilized Rs 3500 crore of this facility on October 14, 2008.
2. The special fixed rate term repo under liquidity adjustment facility will now be conducted every day until further notice up to a cumulative amount of Rs 20,000 crore for the same purpose. Accordingly, the residual amount will be notified every day till further notice.
3. The eligible banks and PDs may submit their applications electronically through NDS between 2.30 PM to 3.15 PM. today. Allocations would normally be made on a pro-rata basis in case the tenders exceed the notified amount.
4. The Reserve Bank will issue a press release each day mentioning the cumulative utilisation by banks and PDs under this facility, the notified amount and the tenor for the next day’s auction.
5. This repo will be in addition to the repo/reverse repo auctions conducted under Liquidity Adjustment Facility (LAF) and Second Liquidity Adjustment Facility (SLAF) which will be held as usual.
6. The settlement for the special repo would be conducted separately and on gross basis.
7. The other terms and conditions for the special repo would remain as notified by our earlier circulars on the Liquidity Adjustment Facility.
Yours faithfully,
(Chandan Sinha)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/224 · issued 15 Oct 2008. The plain-English explanation above is BankPulse’s own independent summary.
Ensure settlement for special repo is done separately on a gross basis.
💻 IT / Systems
Submit applications electronically via NDS between 2:30 PM and 3:15 PM on auction days.
📜 Compliance
Monitor daily RBI press releases for cumulative utilization, notified amount, and tenor.
Integrate this facility into your liquidity management strategy for mutual fund support.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (All Scheduled Commercial Banks (excluding RRBs), Primary Dealers, Mutual Funds (indirectly through bank lending)), your first concrete step on “RBI Launches Daily Special Fixed Rate Repo for Mutual Fund Liquidity” is: “Submit applications electronically via NDS between 2:30 PM and 3:15 PM on auction days.” (RBI issued this 15 Oct 2008).
Circular: RBI/2008-09/224 -- RBI Launches Daily Special Fixed Rate Repo for Mutual Fund Liquidity
Issued: 15 Oct 2008
Action required: Submit applications electronically via NDS between 2:30 PM and 3:15 PM on auction days.
Action required: Monitor daily RBI press releases for cumulative utilization, notified amount, and tenor.
Action required: Ensure settlement for special repo is done separately on a gross basis.
Action required: Integrate this facility into your liquidity management strategy for mutual fund support.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4540&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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