RBI allows reversal of liquidity facilities under SDF and MSF even on weekends, holidays
This new measure will come into effect from December 30 and will be reviewed after six months.
The Reserve Bank of India today decided to keep the policy rate unchanged at 6.5% for the fifth time in a row as it maintains a tight vigil on inflation.
The rate increase cycle was paused in April after six consecutive rate hikes, aggregating to 250 basis points since May 2022. Consequently, Standing Deposit Facility rate will remain at 6.25% and Marginal Standing Facility (MSF) at 6.75%, said RBI Governor Shaktikanta Das.
Through standing deposit facility (SDF), the RBI sucks out excess liquidity in the banking system as part of Liquidity Adjustment Facility (LAF) corridor, instead of the reverse repo which offer lower rate of 6%.
Through the marginal standing facility (MSF), RBI supplies liquidity when conditions are challenging.
«With regard to the standing facilities of the Reserve Bank under the LAF, we have noticed simultaneous high utilisation of both MSF and SDF by the banks. This was pointed out in the last monetary policy statement.
We propose to address thi situation and have decided to allow reversal of liquidity facilities under both SDF and MSF even during weekends and holidays with effect from December 30, 2023. It is expected that this measure will facilitate better fund management by the banks.
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