The Reserve Bank of India (RBI) has implemented a 3.75 percent Standing Deposit Facility (SDF) as part of its liquidity management strategy.
The RBI has reinstated the Liquidity Adjustment Facility (LAF) corridor by establishing SDF, with SDF at 3.75 percent and Marginal Standing Facility (MSF) at 4.25 percent.
At this time, the SDF facility will be used to absorb excess liquidity from the system and will only apply to overnight deposits. When longer-term liquidity is required, the SDF will be able to absorb it.
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RBI's six-member Monetary Policy Committee (MPC) agreed to maintain the repo rate steady, even though Russia's invasion of Ukraine boosted inflation and the downside risk to growth. The MPC maintained its accommodative stance while focused on removing accommodation to keep inflation within the target range while supporting development.
The RBI has altered the liquidity management framework, introducing the standing deposit facility at the lower end of the interest rate corridor, in addition to changing the phrasing of its guidelines.
With no change this time as well, the repo rate currently stands at 4 percent. The RBI has raised the reverse repo rate by 40 basis points to 3.75 percent.
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