What changed
The fixed repo rate under LAF was reduced by 100 basis points from 7.5% to 6.5%, effective December 8, 2008. Consequently, the interest rate on the Special Refinance Facility (SRF) for scheduled commercial banks (excluding RRBs) was aligned to the new repo rate of 6.5%.
What it means for you
Banks can now access the SRF at a lower cost of 6.5%, reducing their funding expenses. This supports liquidity management and encourages lending, as the cheaper refinance facility eases pressure on bank margins.
What you must do
- Update internal systems to reflect the new SRF rate of 6.5% from December 8, 2008.
- Communicate the revised rate to treasury and lending teams for accurate cost calculations.
- Review liquidity positions to optimize usage of the cheaper SRF facility.
- Ensure compliance with SRF eligibility criteria as per Section 17(3B) of the RBI Act.
Who it affects
All scheduled commercial banks (excluding Regional Rural Banks), Treasury departments managing liquidity and refinance operations, Lending teams relying on SRF for funding
What is the new interest rate on the Special Refinance Facility?
The SRF rate is now 6.5% per annum, effective December 8, 2008, matching the reduced repo rate.
Which banks are eligible for this SRF?
All scheduled commercial banks are eligible, except Regional Rural Banks (RRBs).
Why was the SRF rate reduced?
The reduction follows RBI's decision to cut the repo rate by 100 bps to 6.5%, as announced in a press release on December 6, 2008.