What changed
The repo rate under the Liquidity Adjustment Facility (LAF) was increased by 25 basis points from 7.50% to 7.75%, effective immediately from October 29, 2013. As a result, 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 7.75%.
What it means for you
Banks accessing Export Credit Refinance will face higher interest costs, squeezing margins on export lending. Primary Dealers will also pay more for collateralised liquidity support, potentially tightening market liquidity. This rate hike signals RBI's intent to curb inflation, and banks may pass on the cost to borrowers, impacting loan demand.
What you must do
- Review and adjust pricing on export credit products to reflect the higher refinance cost.
- Reassess liquidity management strategies to minimise reliance on standing facilities.
- Communicate the rate change to treasury and credit teams for updated cost calculations.
- Monitor market liquidity conditions and adjust borrowing plans accordingly.
Who it affects
All scheduled banks (excluding RRBs) using Export Credit Refinance, Primary Dealers availing collateralised liquidity support, Treasury departments managing liquidity and funding costs
What is the new repo rate effective from October 29, 2013?
The repo rate was increased by 25 basis points to 7.75% per annum, as announced in the Second Quarter Review of Monetary Policy 2013-14.
Which standing liquidity facilities are affected by this change?
The Export Credit Refinance (ECR) for banks and the collateralised liquidity support for Primary Dealers are now priced at the revised repo rate of 7.75%.
Are Regional Rural Banks (RRBs) impacted by this circular?
No, the circular explicitly excludes RRBs from its scope. Only scheduled banks (excluding RRBs) and Primary Dealers are affected.