RBI tweaks ecosystem to ease market liquidity

Banks allowed flexibility to manage funds over weekends and on holidays

- Gopika Gopakumar

The Reserve Bank of India’s (RBI) move to allow banks more flexibility in managing funds over weekends and on holidays will help smoothen the functioning of the money market and in reducing cost, according to traders.

The central bank governor Shaktikanta Das, while announcing RBI’s monetary policy review said it will allow banks to move and borrow between the standing deposit facility (SDF) and marginal standing facility (MSF) during weekends and holidays from 30 December. This will be reviewed after six months.

“With regard to the standing facilities of the Reserve Bank under the LAF, we have noticed simultaneous high utilisation of both MSF and SDF by the banks. This was pointed out in the last monetary policy statement. We propose to address this situation and have decided to allow reversal of liquidity facilities under both SDF and MSF even during weekends and holidays with effect from 30 December 2023," said RBI.