What changed
The fixed repo rate under the Liquidity Adjustment Facility was reduced by 100 basis points from 9.0% to 8.0% with immediate effect. Consequently, the standing liquidity facilities for banks (export credit refinance) and Primary Dealers (collateralised liquidity support) are now available at the new repo rate of 8.0%.
What it means for you
Banks and Primary Dealers will now access standing liquidity from RBI at a lower cost, reducing their funding expenses. This rate cut is aimed at easing liquidity conditions and supporting credit flow, especially for export credit refinance. Lenders can expect improved net interest margins if they pass on lower costs to borrowers selectively.
What you must do
- Update internal systems to reflect the new repo rate of 8.0% for all standing liquidity facilities.
- Review your bank's export credit refinance availed and recalculate interest costs accordingly.
- Communicate the rate change to treasury and ALCO teams for liquidity planning.
- Assess the impact on your bank's cost of funds and potential pass-through to lending rates.
Who it affects
All Scheduled Banks (excluding Regional Rural Banks), Primary Dealers, Treasury departments of banks, Export credit borrowers
Does this repo rate cut apply to all LAF operations?
Yes, the fixed repo rate under LAF has been reduced to 8.0% with immediate effect, impacting all standing liquidity facilities including export credit refinance for banks and collateralised liquidity support for Primary Dealers.
Are Regional Rural Banks covered by this notification?
No, the notification explicitly excludes Regional Rural Banks (RRBs) from its scope.
When did this change take effect?
The change was announced on October 20, 2008, and took effect immediately from that date.