The Reserve Bank of India has introduced a Standing Liquidity Facility (SLF) for Primary Dealers (PDs) to enhance liquidity management and support orderly financial market operations. The facility will allow PDs access to overnight liquidity, strengthening their role as market makers.
RBI Introduces Standing Liquidity Facility for Primary Dealers
The Reserve Bank of India (RBI) has established a Standing Liquidity Facility (SLF) for Primary Dealers (PDs), effective October 7, 2026. This initiative aims to improve liquidity conditions and reinforce the market-making function of PDs in government securities markets.
The SLF will provide overnight liquidity to eligible PDs against approved collateral. The facility is designed to reduce volatility in short-term interest rates and support depth in the G-Sec market. PDs are expected to use the SLF prudently, maintaining sound risk management practices.
This step aligns with international best practices and RBI’s ongoing efforts to deepen financial markets. By ensuring predictable liquidity access, the SLF enhances the operational resilience of PDs, particularly during periods of market stress.
Market participants, especially financial institutions engaged in government securities trading, should assess the implications for repo pricing and liquidity planning. The RBI will monitor take-up and adjust terms as required to maintain financial stability.