What changed
The Monetary Policy Committee reduced the policy repo rate by 25 basis points from 6.25% to 6.00%, effective immediately. Consequently, the SDF rate was adjusted to 5.75% and the MSF rate to 6.25%. All other terms of the LAF scheme remain unchanged.
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 your lending and deposit rate pricing to reflect the lower repo rate.
- Assess the impact on your net interest margin and adjust treasury operations accordingly.
- Communicate the rate change to your asset-liability management committee for strategic planning.
- Monitor market liquidity conditions as the new rates take effect.
Who it affects
All LAF participants including banks and primary dealers, Borrowers with floating rate loans linked to repo rate, Treasury and asset-liability management teams
When does the new repo rate take effect?
The repo rate cut to 6.00% is effective immediately from April 9, 2025, as announced in the monetary policy statement.
How do the SDF and MSF rates change?
The SDF rate is adjusted to 5.75% and the MSF rate to 6.25%, both effective immediately.
Are any other LAF terms changed?
No, all other terms and conditions of the LAF scheme remain unchanged.