What changed
The special term repo facility, previously available for banks to fund mutual funds, NBFCs, and HFCs, has been discontinued with immediate effect. Banks cannot roll over any outstanding liabilities under this facility upon maturity.
What it means for you
Banks lose a dedicated liquidity window for lending to mutual funds, NBFCs, and HFCs, potentially tightening funding for these sectors. This aligns with the monetary policy stance to normalize liquidity measures as the crisis-era support is withdrawn.
What you must do
- Cease any new borrowing under the special term repo facility immediately.
- Ensure outstanding liabilities under this facility are repaid at maturity without rollover.
- Review alternative funding sources for mutual funds, NBFCs, and HFCs, such as regular repo or market borrowings.
Who it affects
All scheduled commercial banks (excluding RRBs), Primary dealers
What is the effective date of this discontinuation?
The discontinuation is effective immediately from October 27, 2009, as announced in the Second Quarter Review of Monetary Policy 2009-10.
Can we roll over existing borrowings under this facility?
No, outstanding liabilities under the special term repo facility cannot be rolled over on maturity and must be repaid.
Does this affect all scheduled commercial banks?
Yes, all scheduled commercial banks except Regional Rural Banks (RRBs) are affected, along with primary dealers.