What changed
The repo rate under the Liquidity Adjustment Facility (LAF) was increased by 25 basis points from 7.25% to 7.50%, effective immediately from September 20, 2013. Consequently, the standing liquidity facilities—Export Credit Refinance for banks and collateralised liquidity support for Primary Dealers—are now available at the revised repo rate of 7.50%.
What it means for you
Banks accessing Export Credit Refinance will face higher interest costs, potentially squeezing margins on export lending. Primary Dealers will also see increased funding costs for their liquidity support. This aligns with RBI's tightening stance to manage inflation, and banks may need to reassess their liquidity management and lending rates.
What you must do
- Review your bank's exposure to Export Credit Refinance and calculate the incremental cost impact of the 25 bps hike.
- Communicate the revised funding cost to treasury and credit teams to adjust pricing on export loans.
- Monitor LAF operations and adjust liquidity buffers to minimize reliance on standing facilities at higher rates.
- Assess the impact on net interest margins and consider passing on costs to borrowers where feasible.
Who it affects
All Scheduled Banks (excluding RRBs) availing Export Credit Refinance, Primary Dealers using collateralised liquidity support from RBI, Treasury and ALM desks of banks, Export credit lending departments
What is the new repo rate effective from September 20, 2013?
The repo rate was increased by 25 basis points from 7.25% to 7.50%, effective immediately from September 20, 2013.
Which standing liquidity facilities are affected by this change?
The Export Credit Refinance (ECR) facility for banks and the collateralised liquidity support for Primary Dealers are now priced at the revised repo rate of 7.50%.
Are Regional Rural Banks (RRBs) impacted by this notification?
No, the notification explicitly excludes Regional Rural Banks (RRBs) from its scope.