What changed
The repo rate under the Liquidity Adjustment Facility was increased by 25 basis points from 8.00% to 8.25%. Consequently, the reverse repo rate automatically adjusted to 7.25% and the Marginal Standing Facility rate to 9.25%.
What it means for you
Banks will face higher cost of funds from RBI, likely leading to increased lending rates for customers. The MSF rate at 9.25% provides a penal borrowing window, reinforcing tighter monetary conditions.
What you must do
- Review and adjust lending and deposit rates to reflect the new repo rate of 8.25%.
- Update internal systems and treasury operations for the revised LAF and MSF rates.
- Communicate rate changes to customers and align loan pricing strategies accordingly.
- Monitor liquidity position and borrowing costs under the new rate structure.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Primary Dealers, Treasury and ALM teams, Retail and corporate borrowers
When did this rate change take effect?
The repo rate hike and consequent adjustments to reverse repo and MSF rates took effect immediately from September 16, 2011.
What are the new rates for reverse repo and MSF?
The reverse repo rate is now 7.25% and the MSF rate is 9.25%, both effective immediately.
Are there any other changes to LAF or MSF schemes?
No, all other terms and conditions of the current LAF and MSF schemes remain unchanged.