What changed
The Monetary Policy Committee increased the repo rate under the Liquidity Adjustment Facility by 25 basis points from 6.25% to 6.50%. The Standing Liquidity Facility for Primary Dealers, a collateralised liquidity support from RBI, is now available at the revised repo rate of 6.50% with immediate effect.
What it means for you
Primary Dealers will face higher borrowing costs for collateralised liquidity from RBI, directly impacting their funding costs. This rate hike signals continued monetary tightening, which may lead to higher lending rates across the banking system and tighter liquidity conditions for market participants.
What you must do
- Update internal systems to reflect the new SLF rate of 6.50% for Primary Dealers.
- Review liquidity management strategies to account for higher funding costs.
- Communicate the rate change to treasury and dealing teams handling PD operations.
- Assess impact on bond yields and market liquidity in light of the repo rate hike.
Who it affects
Primary Dealers, Treasury departments of banks, Market makers in government securities, RBI's liquidity operations team
What is the new repo rate effective from February 8, 2023?
The repo rate has been increased by 25 basis points to 6.50% per annum.
How does this affect the Standing Liquidity Facility for Primary Dealers?
The SLF, which is collateralised liquidity support from RBI, is now priced at the revised repo rate of 6.50%.
When did this change take effect?
The change is effective immediately from February 8, 2023, as announced in the Monetary Policy Statement.