What changed
The fixed repo rate under the Liquidity Adjustment Facility was reduced by 50 basis points from 8.0% to 7.5%, effective November 3, 2008. Consequently, the Standing Liquidity Facilities for banks (export credit refinance) and Primary Dealers (collateralised liquidity support) are now priced at the new repo rate of 7.5%.
What it means for you
Banks and Primary Dealers will now get cheaper liquidity from RBI, reducing their cost of funds for export credit refinance and collateralised support. This rate cut signals RBI's intent to ease monetary conditions, potentially lowering lending rates and boosting credit flow to the economy.
What you must do
- Update your treasury systems to reflect the new repo rate of 7.5% for all standing liquidity facility transactions.
- Review your export credit refinance availed from RBI and recalculate interest costs at the reduced rate.
- Communicate the rate change to your ALCO and credit teams to reassess lending rate strategies.
- Monitor LAF auctions for any further policy signals and adjust liquidity management accordingly.
Who it affects
All scheduled banks (excluding RRBs), Primary Dealers, Treasury departments of banks, Export credit borrowers (indirectly)
What is the new repo rate effective from November 3, 2008?
The fixed repo rate under LAF has been reduced by 50 basis points from 8.0% to 7.5%.
Which facilities are now available at the new repo rate?
Standing Liquidity Facilities for banks (export credit refinance) and Primary Dealers (collateralised liquidity support) are now available at 7.5%.
Does this circular apply to Regional Rural Banks?
No, the circular explicitly excludes Regional Rural Banks (RRBs) from its scope.