Let's understand these terms n what they actually do *REPO RATE* *LAF (Liquidity Adjustment Facility)* *SDF (Standing Deposit Facility)* *MSF (Marginal Standing Facility)* *Reverse REPO* *Repo Rate* (reduced to 5.50% today by RBI) interest at which *Banks takes Money from the RBI* to overcome their short-term liquidity requirements... *LAF* thru this *RBI injects OR absorbs liquidity into/from the Banking system...* LAF reduce ⬇️liquidity thru *SDF* LAF increase⬆️ liquidity thru *MSF* _What is SDF & MSF....???_ *SDF* the *RBI takes Money from the Banks Without giving any collateral on an overnight basis* Means *SDF is used to Reduce or Suck the liquidity frm the Banking system* Normally it's rate is always KEPT LOWER than REPO... _In Reverse REPO RBI hv to give Collateral backed Assets to take Money frm the Banks...._ *MSF* *Banks "BORROW" money frm RBI on an overnight basis* by providing collateral frm their SLR (Statutory Liquidity Ratio portfolio) It interest is kept ABOVE Repo rate Today the *RBI Increased the GAP in the LAF corridor(GAP btwn SDF & MSF rates)* Key facts *Banks were doing Arbitrage.*