RAS question
After the RBI's December 5, 2025 rate cut, the Standing Deposit Facility (SDF) rate and Marginal Standing Facility (MSF) rate stood at:
Correct answer: (D) SDF: 5.00%, MSF: 5.50%.
After the RBI's December 5, 2025 rate cut, the Standing Deposit Facility rate stood at 5.00% and the Marginal Standing Facility rate stood at 5.50%.
Explanation
The December 2025 Monetary Policy Committee decision reduced the policy repo rate under the liquidity adjustment facility to 5.25%. Once the repo rate moved to 5.25%, the linked corridor rates adjusted around it: the Standing Deposit Facility rate became 5.00%, while the Marginal Standing Facility rate and the Bank Rate became 5.50%. SDF was 25 basis points below repo, and MSF was 25 basis points above repo. The relevant post-cut corridor rates were therefore 5.00% for SDF and 5.50% for MSF, not merely the repo-rate cut itself. This was the fourth consecutive rate cut in 2025, taking cumulative easing to 100 basis points.
Why the other options are wrong
- (A) A gives SDF at 5.75% and MSF at 6.75%, which would place both rates above the post-cut repo rate of 5.25% instead of at 5.00% and 5.50%.
- (B) B is wrong because SDF was not 6.00% after the cut, and MSF was not 6.50%; the post-cut rates were 5.00% and 5.50%.
- (C) C incorrectly states SDF as 5.50% and MSF as 6.00%, but SDF adjusted to 5.00% and MSF to 5.50%.
Concept
This tests RBI monetary policy, especially how SDF and MSF move around the repo rate. It recurs in RAS because prelims often ask direct current-economy facts tied to institutions and policy instruments.