Rishav Gupta
FrankBanker    Research Associate   Exp: Fresher   Enthusiast

Standing Deposit Facility (SDF)

Standing Deposit Facility is a collateral free liquidity absorption mechanism, which RBI uses to absorb liquidity from the banking system and control inflation.

RBI in its circular dated April 8, 2022, announced that a Standing Deposit Facility (SDF) is being operationalised with immediate effect, that is from April 8, 2022 at an interest rate of 3.75%. SDF will replace Fixed Rate Reverse Repo (FRRR) to join repo rate and Marginal Standing Facility (MSF) in the Liquidity Adjustment Facility (LAF) corridor.

The SDF rate will be 25 bps below the policy rate (Repo rate), and it will be applicable to overnight deposits at this stage. It would, however, retain the flexibility to absorb liquidity of longer tenors as and when the need arises, with appropriate pricing.

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