Standing deposit facility

The RBI facility through which banks park surplus funds overnight without receiving any collateral in return. Since April 2022 its rate, set 25 basis points below the repo rate, has been the floor of the policy corridor, replacing the fixed-rate reverse repo in that role.

With the repo rate at 5.50%, the standing deposit facility pays 5.25% and the marginal standing facility, the ceiling where banks borrow against securities, charges 5.75%. That leaves a corridor 50 basis points wide, and overnight rates normally trade inside it.

Because no collateral is needed, the RBI can absorb surplus liquidity without holding enough government securities to hand over, the constraint the reverse repo ran into when liquidity was very large. Where the overnight rate trades in the corridor shows the state of liquidity: near the floor means surplus, near the ceiling means shortage.

Watch the overnight rate against the floor.