The Reserve Bank of India (RBI) has raised the aggregate limit under the Standing Liquidity Facility (SLF) for Standalone Primary Dealers (SPDs) from ₹10,000 crore to ₹15,000 crore, effective April 2, 2025. This move aims to enhance liquidity access for SPDs at the prevailing repo rate.
Key Highlights of RBI’s Decision
Increased Liquidity Support for SPDs:
- Aggregate SLF limit increased from ₹10,000 crore to ₹15,000 crore.
- Individual limits for SPDs will be communicated separately by RBI.
- All other terms and conditions remain unchanged.
Why this move?
RBI assessed the prevailing and evolving liquidity conditions before making this decision. The move provides SPDs with additional funding sources to support their operations.
Expected Benefits of the SLF Increase
- Greater access to liquidity, improving SPD operations in government securities markets.
- Strengthens the role of SPDs in facilitating government borrowing and managing market liquidity.
- Enhances financial stability by ensuring smoother liquidity conditions.
- Complements RBI’s broader liquidity management strategy, including repo operations and open market operations.
Recent Policy Changes for SPDs
Expanded Participation in Repo Operations:
- Earlier, RBI allowed SPDs to participate in all repo operations, regardless of tenor.
- Previously, SPDs were only allowed in overnight liquidity management operations, excluding the Marginal Standing Facility (MSF).
- Participation in long-term Variable Rate Repo (VRR) operations and daily VRRs was on a case-by-case basis.
Other Recent Measures for SPDs:
- SPDs can now borrow in foreign currency from parent companies or authorized entities.
- SPDs can access nostro overdraft facilities for operational use.