Economy
Reverse Repo Rate, Marginal Standing Facility, Standing Deposit Facility
Context
· The Reserve Bank of India (RBI) has introduced a standing deposit facility (SDF) at 3.75%
· Experts see this as a move to raise interest rates without actually raising any key rates.
Liquidity Adjustment Facility
· It is a monetary policy tool used largely by the Reserve Bank of India (RBI) that controls the liquidity or money supply in the economy.
· It does it by either allowing banks to borrow money via repurchase agreements (repos) or lend loans to the RBI via reverse repo agreements.
- Since RBI is also a bank and has to earn more than it pays, the repo rate is higher than the reverse repo rate.
- At present, the repo rate is 4%, and the reverse repo rate is 3.35%.
