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RBI to conduct special 3-day repo borrowing window for Mutual fund

17 Jul 2013 Evaluate

After lifting short term rates to drain out liquidity, the Reserve Bank of India (RBI), as a contingency measure, will conduct a special 3-day repo borrowing window, under which banks can borrow Rs 25,000 crore at an interest rate of 10.25%. Apex Bank, with a view to enable banks to fulfill Mutual Funds’ liquidity needs, decided to conduct special repo window.This facility has been made available for a temporary period until further notice.

Earlier, in its further effort to salvage the depreciating local currency, the RBI raised the Marginal Standing Facility (MSF) rate (rate at which banks can borrow from the RBI at an elevated rate against government securities during times of tight cash) and Bank Rate each by 200 basis points to 10.25% as against 8.25% each earlier and limited its lending of overnight funds to banks to Rs 75,000 crore, which meant that banks would have to pay a higher interest rate of 10.25% if they required more than this limit.

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