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RBI monetary policy decision: Repo rate, SDF rate, stance and key terms explained


The Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) will come out with its decision on April 5. The announcement will address key interest rates. Here are all the key terms you need to know before the decision:

RBI MPC: A police officer walks past the Reserve Bank of India (RBI) logo inside its headquarters in Mumbai, India.(Reuters)

What is repo rate?

Repo rate is the rate at which the RBI provides liquidity to banks against the collateral of government and other approved securities. 

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At present, the repo rate is at 6.50 per cent. In the last monetary policy meet in February, the central bank kept the repo rate unchanged at 6.50 per cent for the sixth consecutive time. The repo rate has been unchanged since April 2023 monetary policy. 

What is Standing Deposit Facility (SDF) rate?

Standing Deposit Facility (SDF) rate is a rate at which the RBI accepts uncollateralised deposits on an overnight basis, from banks. It is a tool that helps in liquidity management and is placed at 25 basis points below the policy repo rate. Currently, SDF rate is at 6.25 per cent.

What is Marginal Standing Facility (MSF) rate?

Marginal Standing Facility (MSF) rate is the penal rate at which banks can borrow on an overnight basis from the central bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio. This is up to a predefined limit (2 per cent) and the MSF rate currently stands at 6.75 per cent.

What is monetary policy stance?

There are various monetary policy stances. Accommodative means the central bank is prepared to expand the money supply to boost economic growth while neutral suggests that the central bank can either cut rate or increase rate. A hawkish stance shows that the central bank’s top priority is to keep the inflation low. 

 

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