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By introducing a standing deposit facility (SDF) for absorbing liquidity from the banking system at 3.75 per cent, the Reserve Bank of India (RBI) has normalised the liquidity corridor.
With this, the liquidity corridor has been normalised to a symmetrical 50 basis points (SDF is 25 basis points below the repo rate of 4 per cent and the Marginal Standing Facility/MSF is at 25 basis points above the repo rate).
During the Covid-19 pandemic, the liquidity corridor was widened to an asymmetrical 90 basis points, with reverse repo, which acted as the floor of the corridor, being 65 basis points below the repo rate and the MSF at 25 basis points above the repo rate.
RBI Governor Shaktikanta Das said SDF and MSF will be available from 5.30 pm to 11.59 pm throughout the year, irrespective of a public holiday or Saturday and Sunday.
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