The LAF corridor has the SDF rate at the floor (repo minus 25 bps) and MSF rate at the ceiling (repo plus 25 bps). What is the Standing Deposit Facility (SD

The Standing Deposit Facility (SDF), introduced by the RBI in April 2022 and formalised in the RBI Act, is a facility through which banks can park their excess overnight liquidity with the RBI without providing any collateral. This is the key difference from the earlier reverse repo: under the fixed rate reverse repo, when banks deposited funds with the RBI overnight, they received government securities as collateral in return. Under the SDF, no collateral is exchanged — it is a pure uncollateralised deposit. This distinction matters: (1) the SDF helps the RBI absorb unlimited surplus liquidity without the operational constraints of G-Sec availability for collateral; and (2) the absence of collateral means the SDF rate is set slightly lower than the repo rate (repo minus 25 bps) to compensate banks for the absence of collateral security. With repo at 5.25%, SDF = 5.00% and MSF = 5.50%.