What changed
The Monetary Policy Committee reduced the policy repo rate under the Liquidity Adjustment Facility by 25 basis points from 6.50% to 6.25%, effective immediately. Consequently, the standing deposit facility rate now stands at 6.00% and the marginal standing facility rate at 6.50%.
What it means for you
Banks can now borrow from RBI at a lower repo rate, reducing their cost of funds. This may lead to lower lending rates for borrowers, potentially boosting credit demand. The SDF and MSF rate adjustments ensure the rate corridor remains aligned with the new repo rate.
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 management.
- Assess impact on net interest margins and loan pricing strategies.
- 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, Borrowers with floating rate loans linked to repo rate
When did this repo rate cut take effect?
The rate cut is effective from February 7, 2025, as announced in the Monetary Policy Statement.
What are the new SDF and MSF rates?
The SDF rate is now 6.00% and the MSF rate is 6.50%, adjusted in line with the repo rate reduction.
Are any other LAF terms changing?
No, all other terms and conditions of the LAF scheme remain unchanged.