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Friday. W.E.F. 29.10.2013 RBI has increased the liquidity provided through term repos of -7-days
and 14-day tenor from 0.25% of NDTL of banking system to 0.5%.
Reverse Repo Rate: - RBI borrowing rate from Banks. It absorbs liquidity. Increase in reverse
repo rate is positive for banks as banks earn more. Present reverse repo rate is 6.25 %(w.e.f.
29.10..2013)
Tenor: - Repo & Reverse Repo auctions are conducted under LAF window on daily basis except
Saturdays.
Eligibility: - All commercial banks (except Regional Rural Banks RRBs) and Primary Dealers
(PDs) having current account and SGL account with RBI.
Minimum bid size: - Rs.5 crores (multiples of Rs.5 Crore.)
Eligible Securities: - Repos and Reverse Repos in transferable Central Govt. dated securities and
treasury bills.
RBI stipulated that w.e.f 17.07.2013, overall allocation of funds under LAF will be limited to 1%
of Net Demand and Time Liabilities (NDTL) of the banking system, reckoned as Rs. 75,000 crore
for this purpose..
net demand and time liabilities (NDTL). MSF can be availed on overnight basis. Min. request size
is Re.1 crore. MSF is available between 3.30 p.m. to 4.30 p.m. w.e.f 16.6.11, In view of rupee
depreciating in the last six weeks, MSF rate is recalibrated w.e.f. 17.07.2013 to be 300 basis
points above the policy repo rate under LAF. Consequently present MSF rate is 10.25% .
(w.e.f.17.07.2013). However in Mid-Quarterly Policy Review on 20.09.2013, RBI has reduced
MSF rate by 75 basis points from 10.25% to 9.50% w.e.f. 20.09.2013. As rupee has strengthened
RBI eased liquidity by decreasing MSF rate by 50 base points from 9.5% to 9% w.e.f.
07.10.2013. MSF rate is further reduced by 25 base points from 9% to 8.75% w.e.f. 29.10.2013.
This move will reduce rates, and easing liquidity will bring down cost of short term funds.
There will henceforth be only one independently varying policy rate and that will be Repo
Rate.
ii.
The Reverse Repo Rate will continue to be operative but it will be pegged at a fixed 100
basis points below the repo rate. It will no longer be an independent rate. A new Marginal
Standing Facility (MSF) was instituted from which Scheduled Commercial Banks (SCBs)
can borrow overnight up to one percent of their respective NDTL. The rate of interest on
amount accessed from this facility will be 100 basis points above the repo rate.
iii.
As per above scheme, the revised corridor will have a fixed width of 200 basis points. The
repo rate will be in the middle. The reverse repo rate will be 100 basis points below Repo
rate and the MSF rate 100 basis points above it.
iv.
v.
In view of RBI declaring MSF rate to 8.75% and repo rate to be 7.25% (consequently
reverse repo rate getting adjusted to 6.75%) w.e.f. 29.10.2013, the present corridor is 200
basis points or 2%
3