Last edited: August 19, 2025 #sdf 1. The Reserve Bank of India Act, 1934, until 2018, did not permit RBI to borrow on clean basis from banks, viz. without the payment of interest thereon. 2. However, with evolving liquidity management framework, RBI felt the need to have a tool to be able to borrow from banks/absorb unlimited liquidity, which was possible only without offering collaterals to the bank. 3. [December 2003](RBI_Group-Committee_20031202_Report%20of%20the%20Internal%20Group%20on%20Liquidity%20Adjustment%20Facility.pdf#page=14&selection=144,0,146,4) - Report of the Internal Group on Liquidity Adjustment Facility suggested the institution of a standing deposit facility which would allow RBI to borrow on clean basis from banks and pay interest thereon. 4. [May 18, 2004](RBI_MPS_20040518_Annual%20Policy%20Statement%20For%20The%20Year%202004-05.pdf) - In the Annual Policy Statement for 2004-05, RBI mentioned that it agreed with the proposal, but this has to await amendment to the relevant provisions of the RBI Act, 1934 5. [November 2015](RBI_MPS_SDRP_20170406.pdf#page=2&selection=75,1,84,1) - RBI formally proposed the introduction of a Standing Deposit Facility (SDF), though the need for this facility was also mentioned by several reports as part of liquidity management. 6. Before introduction of SDF facility, the fixed rate reverse repo acted as a floor of the corridor around the targeted rate. 7. ==*Related* [Nov 25, 2016](RBI_Notification_20161125_Liquidity%20Adjustment%20Facility%20–%20Oil%20Marketing%20Companies%20Government%20of%20India%20Special%20Bonds%20(Oil%20Bonds)%20as%20eligible%20collateral%20under%20LAF%20MSF%20and%20Removal%20of%20Margin%20Requirement%20for%20Reverse%20Repos.pdf)== - RBI decided to do away with the margin requirement for the securities provided by Reserve Bank of India as collateral to the successful participants in Reverse Repo operations (including Term Reverse Repos). 8. [2018](https://www.indiabudget.gov.in/budget2018-2019/ub2018-19/fb/bill.pdf) - With amendments to Section 17 of the RBI Act by the Finance Act 2018, the RBI introduced the Standing Deposit Facility (SDF). 9. SDF rate was to provide a firm floor to the behaviour of call rates while the repo rate would continue to provide the signalling stance from RBI 10. [April 08, 2022](RBI_MPS_SDRP_20220408.pdf) - the facility became [effective](RBI_Press%20Release_20220408_RBI%20to%20operationalise%20Standing%20Deposit%20facility%20(SDF).pdf) and it emerged as financial stability tool in the event of _excess liquidity_ with banks. 11. The SDF replaced the fixed rate reverse repo (FRRR) as the floor of the LAF corridor 12. The RBI could now borrow from the banks overnight without any collateral. 13. It was offered after the closure of market hours, from 17:30 hrs to 23:59 on all days of the week. As there is no limit, it acts as a ceiling of the corridor around the call money rate. 14. Since its introduction in 2022, the SDF rate is 25 bps below the policy rate. Both the standing facilities, viz. MSF and SDF have been available, are available at the discretion of banks, on all days of the week (Sundays and holidays), throughout the year. But reversal was allowed on the next working day until Dec 30, 2023. 1. This is unlike repo/reverse repo, OMO and CRR which are available at the discretion of the Reserve Bank. 15. [8 December, 2023](https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=56887) - RBI notified on [Dec 27, 2023](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=56998), with effect from December 30, 2023, to allow the reversal under both MSF and SDF even on weekends and holidays. 16. **Timings:** 1. SDF facility was available between 17:30 hrs to 23:59 (until June 30, 2025), and reversed next day. 2. [Jun 30, 2025](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=60740) - ==In light of the extension of [market timings for call money](https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=60701) to 7:00 PM, it was decided that the Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) will be available between 7:00 PM and 11:59 PM with effect from July 01, 2025. 17. The settlement of the same occurs in real-time. The reversal happens early morning next day. 18. An optional automated sweep-in and sweep-out (ASISO) facility is also available in the e-Kuber system. 19. The Reversal of standing facilities (as also the repos/ reverse repos) is carried out at the beginning of the day of the second leg. 20. The fixed rate reverse repo (FRRR) rate has been retained at 3.35 per cent since May 2020, as part of RBI’s toolkit and its operation will be at the discretion of the RBI for purposes specified from time to time. The ==availability of both along with longer tenor reverse repos is expected to impart greater flexibility to the RBI’s liquidity absorption operation==. 21. [Cash Reserve Ratio (CRR)](Cash%20Reserve%20Ratio%20(CRR).md) & [SLR - Statutory Liquidity Ratio](SLR%20-%20Statutory%20Liquidity%20Ratio.md) 1. The funds deposited with RBI under SDF are eligible asset for maintenance of SLR, but are not adjusted for CRR, as stated in [Reserve Bank of India (Commercial Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, (2025)](https://www.rbi.org.in/scripts/BS_ViewMasDirections.aspx?id=13160) 22. Along with MSF, the advantage of an SDF is that it gives the central bank a window to intervene in both directions, when needed, to align the operating target, that is weighted average call money rate, with policy rate, and have the volatility in interbank rates restricted to the corridor. 23. This [document]( https://www.rbi.org.in/hindi1/Upload/content/PDFs/PR41_AN.pdf) further described the salient features of this facility. ### How does SDF compare with with CRR? 1. The CRR is mandated under a statutory provision at the discretion of the Reserve Bank, to all scheduled banks uniformly irrespective of their liquidity position, whereas banks, with surplus resources, are free to deposit funds under this facility at their discretion. 2. SDF is available at a rate lower than the repo rate but there is no interest on [[Cash Reserve Ratio (CRR)|Cash Reserve Ratio (CRR)]]. ### Is it a replacement to lending in inter-bank market? 1. It is a dilemma that confronts RBI on many days. 2. The aim of the standing facilities is to not replace the inter-bank market. First, the SDF and [[Marginal Standing Facility (MSF), 2011|MSF]] are only available after the end of money market hours. Though there have been days where few banks have deposited funds with the RBI under SDF when there are other borrowing under MSF. This simultaneous high utilisation of both MSF and SDF by the banks was somewhat addressed by allowing reversal of SDF and MSF even on weekends and holidays. 3. Such trends in liquidity may even happen on weekdays and when the call money rate is higher or around the policy rate, which is the incentive on the part of market participants to deploy resources first in the market on account of higher return that it would fetch and come to RBI only when they would not be in a position to deploy funds around the targeted rate (that is call money being much lower than the repo rate). 4. But the framework of standing facilities (and marginal standing facilities) clearly aims for banks to lend/borrow among each other rather than with the central bank, knowing that they (banks) can lend/borrow in the inter-bank money market at rates higher/lower than the rate at which they could lend to/borrow from a central bank. Thus the corridor system actually incentivises market activity, and without this market activity (trading among the banks), the transmission process of the monetary policy will be very difficult to be achieved. 5. **So such days may not persist for more than one working day. 6. However, one may also argue why does RBI lend/borrow with the banks in the first place, and provide short-term liquidity by repos/reverse repos but should rather provide liquidity via OMOs and the banks should allocate it among themselves in the inter-bank market and supply bank reserves. *But, this is case of idealized or an efficient market, and certain factors make this difficult like information asymmetries, e.g. about bank assets-[7](https://rbi.org.in/scripts/PublicationReportDetails.aspx?ID=944#F7), banks free-riding on each other’s liquidity or on the central bank liquidity-[8](https://rbi.org.in/scripts/PublicationReportDetails.aspx?ID=944#F8). 7. As of Nov-2024, the SDF rate is 25 bps below the policy rate. Both the standing facilities, viz. MSF and SDF are available on all days of the week, throughout the year. 8. Both the standing facilities are availed at the discretion of banks, while others like the LAF are determined by the RBI. >Kumar, A., Sachdeva, P.,Bhattacharyya, I. (2025, April 22). *Three Years of the Standing Deposit Facility: Some Insights.* RBI Monthly Bulletin of April 2025. [Link](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=23327) ## Data Releases 1. Daily Money Market Operations 1. Daily Operations & Outstanding(both)- Marginal Standing Facility (MSF) & Standing Deposit Facility (SDF) 2. Monthly RBI Bulletin - RBI's Standing Facilities # References 1. RBI. (2022, April 8). _Governor's statement: April 8, 2022_. [Link](https://www.rbi.org.in/commonman/english/scripts/PressReleases.aspx?Id=3352) 2. RBI. (2022, April 8). _RBI to operationalise Standing Deposit Facility (SDF)_. [Link](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=53539) 3. Kumar, A., Sachdeva, P.,Bhattacharyya, I. (2025, April 22). *Three Years of the Standing Deposit Facility: Some Insights.* RBI Monthly Bulletin of April 2025. [Link](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=23327) # Related Notes 1. [[Money Market Operations (MMO)]] 2. [[Monetary Policy Frameworks in India]] 3. [[Monetary Policy Transmission OPEN]] 4. [[Marginal Standing Facility (MSF), 2011]] 5. [SLR - Statutory Liquidity Ratio](SLR%20-%20Statutory%20Liquidity%20Ratio.md)