Here’s a look at latest RBI policy rates: Repo rate at 6.25% Standing Deposit Facility (SDF) at 6% Marginal Standing Facility (MSF) at 6.5% Bank Rate at 6.5% Reverse repo rate at 3.35% CRR at 4% India- Credit growth is falling. Is RBI’s High SDF Discouraging Bank Lending? The RBI has kept the Standing Deposit Facility (SDF) at 6%, while the Reverse Repo remains at 3.35%—creating an unusually wide gap. Ideally, the SDF should be closer to the Reverse Repo, with a slightly wider LAF corridor to encourage banks to lend rather than park funds with the RBI. Why is RBI Keeping SDF High? Bank Liquidity Management – A high SDF rate (6%) makes it attractive for banks to park excess funds with RBI rather than lending. This could slow credit growth. Inflation Control Over Growth – A narrower LAF corridor (SDF at 6%, MSF at 6.5%) signals RBI’s preference for tight liquidity and inflation control over aggressive credit expansion. What Could Have Been Better? Had RBI kept the SDF closer to Reverse Repo and allowed a wider corridor, banks would have been nudged to lend more rather than parking funds with RBI. But global currency pressures may have forced RBI’s hand. Rupee vs. Dollar Factor – A higher SDF indirectly keeps short-term rates elevated, maintaining the gap between Indian and US bond yields. With the rupee weakening, RBI may be ensuring that capital outflows are minimized. #rbipolicy #monetarypolicy #liquidity