What changed
The RBI raised the quantum of liquidity provided through 7-day and 14-day term repo auctions from 0.5% to 0.75% of the banking system's net demand and time liabilities (NDTL). This change took effect from April 1, 2014, following the announcement in the First Bi-monthly Monetary Policy Statement 2014-15. All other terms and conditions of the existing Term Repo scheme remain unchanged.
What it means for you
Banks now have access to more liquidity via term repos, which can help manage short-term funding gaps more comfortably. The increase signals the RBI's intent to ease liquidity conditions without altering the policy rate. Lenders should factor in the higher available quantum when planning their liquidity management and bidding in term repo auctions.
What you must do
- Update your internal liquidity management framework to reflect the higher term repo limit of 0.75% of NDTL.
- Review your bidding strategy for 7-day and 14-day term repo auctions to optimize access to the increased liquidity.
- Communicate the revised limit to your treasury and ALM teams for immediate operational alignment.
- Monitor RBI announcements for any further changes to the term repo scheme terms.
Who it affects
All scheduled commercial banks (excluding RRBs), Treasury departments, Asset-liability management (ALM) teams
What is the effective date of this change?
The increase in term repo liquidity from 0.5% to 0.75% of NDTL is effective from April 1, 2014, with immediate effect.
Does this change affect any other terms of the Term Repo scheme?
No, all other terms and conditions of the current Term Repo scheme remain unchanged as per the circular.
Which banks are covered by this circular?
All scheduled commercial banks, excluding Regional Rural Banks (RRBs), are covered.