What changed
The repo rate under the Liquidity Adjustment Facility was reduced by 25 basis points from 7.75% to 7.50%, effective March 19, 2013. Consequently, the reverse repo rate adjusted to 6.50% and the Marginal Standing Facility rate to 8.50%. No other terms of the LAF or MSF schemes were altered.
What it means for you
Banks can now borrow from RBI at a lower cost, which may reduce their lending rates and encourage credit growth. The automatic adjustments to reverse repo and MSF rates ensure the interest rate corridor remains consistent. This move signals RBI's intent to support economic activity amid the mid-quarter review.
What you must do
- Update your treasury systems and internal lending rate benchmarks to reflect the new repo rate of 7.50%.
- Communicate the rate change to your asset-liability management (ALM) team for liquidity planning.
- Review your loan pricing models to assess potential pass-through to customers.
- Monitor the impact on your net interest margin and adjust deposit rates if needed.
Who it affects
All scheduled commercial banks (excluding RRBs), Primary dealers, Treasury departments, ALM teams
When did this repo rate cut take effect?
The cut was announced on March 19, 2013, and took effect immediately from that date.
What are the new reverse repo and MSF rates?
The reverse repo rate is now 6.50% and the MSF rate is 8.50%, both adjusted automatically following the repo rate change.
Are there any other changes to LAF or MSF schemes?
No, all other terms and conditions of the LAF and MSF schemes remain unchanged as per the notification.