What is the key difference between the SDF and the Reverse Repo Rate?

The SDF allows the RBI to absorb liquidity without providing Government Securities as collateral to banks, bypassing the constraint of a limited G-Sec stock. b) Reverse Repo rate : It is the reverse of repo rate, i.e., this is the rate RBI pays to banks in order to keep additional funds in RBI. The repo rate is always higher than the reverse repo rate to manage liquidity efficiently. c) Standing Deposit Facility (SDF) – it is a monetary policy instrument to absorb liquidity without any collateral. The banks can park excess liquidity through this liquidity window with RBI. By removing the binding collateral constraint on the RBI, the SDF strengthens the operating framework of monetary policy. The SDF     is also a financial stability tool in addition to its role in liquidity management. It will replace the fixed rate reverse repo as the floor of the LAF corridor. In 2018, the amended Section 17 of the RBI Act empowered RBI to introduce the SDF. Both SDF and reverse repo rate are used by the central bank to absorb liquidity in the system. The difference is that through reverse repo operations, the RBI needs to deposit collateral or government securities to borrow from commercial banks/allow them to park excess liquidity; while SDF does not require any such collateral .