What changed
The repo rate under the Liquidity Adjustment Facility was increased by 25 basis points from 7.75% to 8.00% with immediate effect. Standing liquidity facilities for banks (Export Credit Refinance) and Primary Dealers (collateralised liquidity support) are now available at the revised repo rate of 8.0%.
What it means for you
Banks and Primary Dealers will face higher costs for accessing these specific liquidity windows from RBI. This aligns with the monetary tightening stance and will likely increase short-term borrowing costs for lenders relying on these facilities.
What you must do
- Review your bank's reliance on Export Credit Refinance and assess the impact of the 25 bps hike on funding costs.
- Update internal pricing models for loans and advances to reflect the higher cost of liquidity.
- Communicate the rate change to treasury and ALCO teams for immediate adjustment in liquidity planning.
- Evaluate alternative funding sources to minimise dependence on standing facilities at the higher rate.
Who it affects
All scheduled banks (excluding RRBs) that use Export Credit Refinance, Primary Dealers availing collateralised liquidity support, Treasury and asset-liability management teams
What is the new repo rate effective from January 28, 2014?
The repo rate was increased by 25 basis points to 8.00% per annum.
Which liquidity facilities are impacted by this change?
The standing liquidity facilities under Export Credit Refinance for banks and collateralised liquidity support for Primary Dealers are now priced at the revised repo rate.
Does this circular apply to Regional Rural Banks?
No, the circular explicitly excludes Regional Rural Banks (RRBs) from its scope.