Standing Deposit Facility

Standing Deposit Facility

SDF was first recommended by the Urjit Patel committee report in 2014.

Under SDF facility, RBI will be able to borrow funds from the market without any collateral in exchange.

When liquidity is in surplus, it will help RBI to manage the fall in short term rates in the inter-bank market

As there is a cap on bills that could be issued under MSS, RBI felt that another tool was needed to manage surplus liquidity situations arising out of forex interventions

In the Report submitted to RBI, committee said the main advantage of an SDF is that it gives the central bank a window to intervene in both directions, when needed, to achieve the operating interest rate target, with volatility in interbank rates restricted to the corridor.