RBI Annual Report: Standing Deposit Facility costs RBI Rs 7,445 crore in first year

The Standing Deposit Facility of the RBI is used to suck out excess liquidity from the banking system.

The Reserve Bank of India (RBI) paid out Rs 7,445 crore as interest in the first year of its Standing Deposit Facility, according to the central bank's accounts for 2022-23.

The RBI's annual report, released on May 30, also showed that the central bank paid out a net additional Rs 9,068 crore as interest on its Liquidity Adjustment Facility operations.

Put together, the RBI's two main liquidity management facilities cost it Rs 16,513 crore in 2022-23. However, this is well below the Rs 35,501 crore it had to pay as interest to banks in 2021-22 "due to lower surplus liquidity in the banking system", the RBI said in its annual report.

The rollout of the Standing Deposit Facility at the beginning of last year helped the RBI manage the extra liquidity in the banking system. The uncollateralised facility, recommended by the Urjit Patel committee in January 2014, allows banks to park their surplus funds with the RBI at the end of the day at a fixed rate of interest that stands at 6.25 percent.

A reduction in the RBI's interest payout on its liquidity management operations was one of the reasons for the sharp increase in the dividend it transferred to the government.

On the expenditure side, the RBI's provisions surged 14 percent to a record Rs 1.31 lakh crore, thanks to a continued rise in global interest rates, which forced the RBI to mark down the value of its holdings of foreign securities.