The Reserve Bank of India vide its notification dated 8th April 2022, has operationalised the Standing Deposit facility (SDF) from 8th April 2022 at 3.75% which would serve as the floor for the policy corridor. All liquidity adjustment facility (LAF) participants will be eligible to participate in the SDF scheme.
The SDF would replace the Fixed Rate Reverse Repo (FRRR) as the floor of the LAF corridor. The SDF rate will be 25 basis points (bps) below the policy repo rate, i.e., at 3.75 per cent.
Under the SDF, the eligible entities can place deposits with the RBI on an overnight basis. The RBI, however, retains the flexibility to absorb liquidity for longer tenors under the SDF with appropriate pricing, as and when the need arises.
SDF operations will be conducted on the RBI’s e-Kuber system, where banks can submit their bids through electronic mode. Under the Straight Through Processing (STP) mode, the bids would be settled automatically and immediately on receipt by e-Kuber system with concurrent debit of funds so as to ensure efficient and faster processing. The transactions undertaken by the participant shall be final and any request for cancellation/ modification of the bids shall not be entertained.
