What changed
The Monetary Policy Committee increased the repo rate under LAF by 25 basis points from 6.25% to 6.50%, effective February 8, 2023. Consequently, the SDF rate was adjusted to 6.25% and the MSF rate to 6.75%.
What it means for you
Banks will face higher cost of funds from the RBI's liquidity window, which may lead to increased lending rates for customers. The hike signals continued tightening to curb inflation, impacting loan demand and net interest margins.
What you must do
- Review and adjust your bank's lending and deposit rates in line with the new repo rate.
- Communicate the rate change to treasury and ALCO teams for liquidity planning.
- Assess impact on loan book repricing and customer affordability.
- Update internal systems and reporting for the revised SDF and MSF rates.
Who it affects
All LAF participants including banks and primary dealers, Treasury and asset-liability management teams, Retail and corporate borrowers with floating rate loans
When did this rate change take effect?
The repo rate hike to 6.50% and the adjustments to SDF (6.25%) and MSF (6.75%) took effect immediately from February 8, 2023.
Are there any changes to other LAF terms?
No, all other terms and conditions of the LAF scheme remain unchanged as per the notification.