RBI modifies the environment to improve market liquidity

Traders believe that the Reserve Bank of India’s (RBI) decision to give banks more latitude in managing cash on weekends and holidays will improve the efficiency of the money market and cut costs.

In unveiling the RBI’s monetary policy review, central bank governor Shaktikanta Das stated that starting on December 30, banks will be able to move and borrow between the standing deposit facility (SDF) and marginal standing facility (MSF) on weekends and holidays. We’ll evaluate this in six months.

“We have seen concurrently significant use of both MSF and SDF by the banks with relation to the Reserve Bank’s standing facilities under the LAF. The most recent monetary policy statement made note of this. With effect from December 30, 2023, we have decided to allow reversal of liquidity facilities under both SDF and MSF even on weekends and holidays as part of our proposal to resolve this scenario,” the RBI stated.