What is SDF?
RBI has kept all benchmark rates unchanged. But it has introduced SDF ( Standing Deposit Facility) at 3.75% which is 25bps below Repo Rate of 4% which will help it absorb liquidity. (1/n)
RBI has kept all benchmark rates unchanged. But it has introduced SDF ( Standing Deposit Facility) at 3.75% which is 25bps below Repo Rate of 4% which will help it absorb liquidity. (1/n)
Generally, RBI uses reverse repo to absorb liquidity. In reverse repo, RBI takes liquidity from the banks and gives reverse repo rate of interest to the banks + keeps government securities (GSec, SDL, Tbills) as collateral (2/n)
But, when a huge amount of liquidity needs to be absorbed, it's difficult in many ways for the RBI to give so much collateral in return (3/4)
SDF is the perfect tool then. You can take liquidity and don't have to give the collateral as well (4/4)
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