What changed
The repo rate under the Liquidity Adjustment Facility was cut by 25 basis points to 4.75%, and the reverse repo rate was similarly reduced to 3.25%. These changes took immediate effect from April 21, 2009, starting with the special term repo auction and second LAF that day.
What it means for you
Banks can now borrow from RBI at a lower cost, which may encourage them to reduce lending rates for customers. The reverse repo rate cut makes parking funds with RBI less attractive, potentially pushing banks to deploy more funds into credit markets.
What you must do
- Update your treasury systems to reflect the new repo rate of 4.75% and reverse repo rate of 3.25% for LAF operations.
- Review your lending and deposit rate strategies to align with the reduced policy rates.
- Monitor the special term repo facility modalities expected to be notified separately.
- Communicate the rate changes to your asset-liability management team for liquidity planning.
Who it affects
All scheduled commercial banks (excluding RRBs), Primary dealers, Treasury departments, Asset-liability management teams
When did these rate changes take effect?
The revised rates became effective from April 21, 2009, starting with the special term repo auction and the second LAF conducted that day.
What were the old and new repo and reverse repo rates?
The repo rate was reduced from 5.00% to 4.75%, and the reverse repo rate from 3.50% to 3.25%, both by 25 basis points.
Will there be any changes to the special term repo facility?
Yes, the RBI mentioned that revised modalities for the special term repo facility would be notified separately, as announced in the Annual Policy Statement.