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RBI Standing Deposit Facility: Rising Bank Reliance in March 2025

23 April 20251 min read
BANKING & FINANCERBI Standing DepositFacility: Rising BankReliance in March202523 April 2025safalsetu.com

Why in the news

Banks parked far more surplus cash with the central bank under SDF, reflecting caution about liquidity.

Key facts

  • Average placements: ₹2.13 trillion (March 2025) versus ₹1.12 trillion (February).
  • Share of liquidity absorbed under LAF in H2 FY25: 82.6%.
  • Banks favour SDF over VRRR for instant flexibility.

Why reliance rose

  • 24×7 payments, just-in-time treasury transfers and fear of late reserve shortfalls.

About the SDF

  • Since April 2022, it replaced the fixed-rate reverse repo as the LAF floor.
  • Rate: 25 bps below repo; MSF is 25 bps above, giving a 50 bps corridor.
  • Non-collateralised, overnight, in line with global practice.

Exam angle

  • Corridor: SDF floor, MSF ceiling.

Test yourself

1. The RBI's Standing Deposit Facility rate is set how far below the repo rate?

SDF is 25 bps below repo, and MSF is 25 bps above.

2. What did the SDF replace as the floor of the LAF from April 2022?

SDF replaced the fixed-rate reverse repo as the LAF floor.

3. What share of liquidity absorbed under LAF in H2 FY25 came through SDF?

SDF accounted for 82.6% of liquidity absorbed under the LAF.

This topic is part of Daily Current Affairs 23 April 2025 (23 topics).

All topics of the dayDay quizApril 2025

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