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RBI Introduced SDF-Economy(21st April)

By April 25, 2022May 25th, 2022Economy, FMS, GS 3

 

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.

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  • 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%.

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