What changed
The Monetary Policy Committee increased the policy repo rate under the Liquidity Adjustment Facility by 50 basis points from 5.40% to 5.90%. Consequently, the Standing Liquidity Facility provided to Primary Dealers is now priced at the new repo rate of 5.90% with immediate effect.
What it means for you
Primary Dealers will face higher borrowing costs for collateralised liquidity support from RBI, directly impacting their funding costs. This rate hike signals tighter monetary conditions, which may lead to higher short-term rates across the banking system and influence lending and deposit rates.
What you must do
- Update internal systems to reflect the revised SLF rate of 5.90% for Primary Dealers.
- Communicate the rate change to treasury and dealing teams handling PD operations.
- Review liquidity management strategies in light of the 50 bps repo rate hike.
- Assess impact on your bank's cost of funds and lending rate decisions.
Who it affects
Primary Dealers, Treasury departments of banks, Liquidity management teams, ALCO (Asset Liability Committee)
What is the new repo rate effective from September 30, 2022?
The repo rate has been increased by 50 basis points to 5.90% with immediate effect.
How does this affect the Standing Liquidity Facility for Primary Dealers?
The SLF for Primary Dealers is now available at the revised repo rate of 5.90%, meaning higher cost for collateralised liquidity support from RBI.