RBI on Friday announced the launch of Standing Deposit Facility (SDF). This will be used to bring down the liquidity in the system. Its interest rate will be 3.75 percent. The central bank also announced the launch of Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF).
economic activities corona reached the level from east
RBI Governor Shaktikanta Das said that economic activities have reached the level before Corona. The recovery in the economy continues. In such a situation, the central bank will gradually start withdrawing the liquidity. This work will be done in several years. It will start this year. In fact, after the Corona epidemic started, the central bank had taken several steps to increase liquidity to support the economy.
8.5 lakh crore additional liquidity in the system
Shaktikanta Das said, “In view of Corona, various measures were taken to increase the liquidity. RBI had also taken several steps to increase the liquidity at its level. Due to this there is additional liquidity of 8.5 lakh crores in the system.” He said it will take a few years to get the liquidity back. It could be two years or three years.
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RBI will not allow liquidity crunch
The central bank governor said that our aim is to bring down the excess liquidity in the system. We want to bring it to a level which is in line with the existing monetary policy. While doing so, we would like to ensure that there is no liquidity crunch in the system to meet the needs of the economy, he added.
Standing deposit facility will help in reducing liquidity
SADF will be a major tool for RBI to manage liquidity. The Urjit Patel Committee had first recommended the introduction of a standing deposit facility in 2014. Sometimes banks have more money than they need, and sometimes they have less money than they need. When they have less money than they need, they borrow from RBI under the repo rate. For this, they have to keep government securities with RBI as collateral.