What changed
The repo rate under the Liquidity Adjustment Facility was reduced by 25 basis points from 7.50% to 7.25%. Consequently, the reverse repo rate adjusted to 6.25% and the Marginal Standing Facility rate to 8.25%.
What it means for you
Banks can now borrow from RBI at a lower cost, which may reduce their lending rates over time. The automatic adjustments to reverse repo and MSF rates ensure the rate corridor remains consistent. This move signals RBI's intent to support economic growth by easing monetary policy.
What you must do
- Update your treasury systems to reflect the new repo rate of 7.25%, reverse repo rate of 6.25%, and MSF rate of 8.25%.
- Review your lending and deposit rate strategies to align with the reduced policy rates.
- Communicate the rate changes to your asset-liability management (ALM) teams for liquidity planning.
- Ensure acknowledgment of this circular is sent to RBI as required.
Who it affects
All scheduled commercial banks (excluding RRBs), Primary dealers, Treasury and ALM departments, Borrowers with floating-rate loans
When did this repo rate cut take effect?
The reduction was effective immediately from May 3, 2013, as announced in the Monetary Policy Statement for 2013-14.
Are there any changes to other LAF or MSF terms?
No, all other terms and conditions of the current LAF and MSF schemes remain unchanged.