What changed
The Monetary Policy Statement on May 4, 2022 increased the policy repo rate under the Liquidity Adjustment Facility by 40 basis points from 4.00% to 4.40%. Consequently, the Standing Liquidity Facility for Primary Dealers, which provides collateralised liquidity support, is now priced at the new repo rate of 4.40% with immediate effect.
What it means for you
Primary Dealers will face higher borrowing costs for liquidity accessed through the SLF, directly impacting their funding expenses. This rate hike signals RBI's tightening stance to manage inflation, which may lead to broader increases in short-term lending rates across the banking system.
What you must do
- Update internal systems to reflect the new SLF rate of 4.40% for Primary Dealers.
- Communicate the revised rate to treasury and dealing teams handling PD operations.
- Assess the impact on liquidity management and funding costs for PDs.
- Monitor RBI's future policy actions for further rate adjustments.
Who it affects
Primary Dealers, Treasury departments of banks dealing with PDs, RBI's Liquidity Adjustment Facility operations
What is the new SLF rate for Primary Dealers?
The SLF rate is now 4.40%, effective May 4, 2022, following the 40 bps repo rate hike.
When did this change take effect?
The revised rate applies from May 4, 2022, with immediate effect as per the Monetary Policy Statement.