What changed
The fixed repo rate under the Liquidity Adjustment Facility was reduced by 100 basis points from 7.5% to 6.5%, effective December 8, 2008. Consequently, standing liquidity facilities—export credit refinance for banks and collateralised liquidity support for Primary Dealers—will be priced at the new repo rate of 6.5%.
What it means for you
Banks and Primary Dealers will now access these standing facilities at a lower cost, reducing their funding expenses. This aligns with RBI's broader monetary easing to support liquidity and economic activity during the 2008 financial crisis.
What you must do
- Update internal pricing models for export credit refinance and PD liquidity support to reflect the 6.5% rate from Dec 8, 2008.
- Communicate the revised rate to treasury and credit teams for accurate cost-of-funds calculations.
- Monitor LAF operations to ensure seamless transition to the new repo rate for standing facilities.
Who it affects
All Scheduled Banks (excluding RRBs), Primary Dealers
Which standing liquidity facilities are impacted by this repo rate cut?
Export credit refinance for banks and collateralised liquidity support for Primary Dealers will now be available at the reduced repo rate of 6.5%.
When does the new rate take effect?
The revised rate of 6.5% is effective from December 8, 2008.
Are Regional Rural Banks covered by this circular?
No, the circular explicitly excludes Regional Rural Banks from its scope.