What changed
The repo rate under LAF was increased from 6.00% to 6.25%, and the reverse repo rate from 5.00% to 5.25%, both by 25 basis points. All other LAF scheme terms remain unchanged.
What it means for you
Banks will face higher cost of borrowing from RBI, squeezing net interest margins. Lending and deposit rates may rise, impacting loan demand and profitability. This signals RBI's intent to curb inflation.
What you must do
- Review asset-liability management to absorb higher funding costs.
- Assess impact on loan pricing and adjust lending rates accordingly.
- Communicate rate changes to customers and treasury teams.
- Monitor liquidity position and LAF usage patterns.
Who it affects
All scheduled commercial banks (excluding RRBs), Primary dealers, Treasury departments, Retail and corporate borrowers
When did this rate hike take effect?
The hike was effective immediately from November 2, 2010, as announced in the Second Quarter Review of Monetary Policy.
What are the new repo and reverse repo rates?
The repo rate is now 6.25% and the reverse repo rate is 5.25%, both increased by 25 basis points.
Does this change any other LAF terms?
No, all other terms and conditions of the LAF scheme remain unchanged.