What changed
The Monetary Policy Committee reduced the repo rate under the Liquidity Adjustment Facility by 50 basis points from 6.00% to 5.50%. Consequently, the Standing Liquidity Facility extended to Primary Dealers is now priced at the new repo rate of 5.50%, effective immediately.
What it means for you
Primary Dealers will now access collateralised liquidity support from RBI at a lower cost, reducing their funding expenses. This rate cut signals an accommodative monetary stance, potentially lowering short-term borrowing costs across the banking system. Banks may see improved liquidity conditions and lower yields on government securities.
What you must do
- Update internal systems to reflect the new SLF rate of 5.50% for PD transactions.
- Review liquidity management strategies to align with the lower repo rate environment.
- Communicate the rate change to treasury and dealing teams handling PD operations.
- Monitor market reactions and adjust short-term funding plans accordingly.
Who it affects
Primary Dealers, Treasury departments of banks, RBI's Liquidity Adjustment Facility operations
What is the new SLF rate for Primary Dealers?
The Standing Liquidity Facility for Primary Dealers is now available at the revised repo rate of 5.50%, effective June 6, 2025.
Why was the repo rate reduced?
The Monetary Policy Committee decided to cut the repo rate by 50 bps as part of its bi-monthly monetary policy statement to support economic conditions.
Does this affect other RBI liquidity facilities?
This notification specifically addresses the SLF for Primary Dealers. Other LAF windows may be adjusted separately based on the repo rate change.