Money market traders are likely borrowing overnight funds from the TREPS market at 4.27% and parking with the SDF facility at 5%, resulting in a large sum of money being parked at the Reserve Bank of India (RBI) facility, market participants said.
The SDF window, which came into effect from April 2022, offers 25 basis points lower than the policy repo rate. In the overnight market, volumes in TREPS are much higher than in the call money market due to a wider pool of participants, thus bringing down the TREPS rate versus the call rate. Participants in TREPS, besides mainstream banks, include insurance companies and mutual funds.
“Many are able to borrow from the TREPS window at rates as low as 4.25% over the last few days due to a good amount of surplus liquidity. They then park it in the RBIs SDF window at the end of the day, that’s a 75 basis points gain,” said a money market dealer at a private sector bank.
Banking system liquidity stood at a daily average surplus of ₹2.40 lakh crore so far in February, from a daily average surplus of ₹65,948 crore in January, RBI data showed.
Volume of the TREPS market stood at ₹4.73 lakh crore on Monday, with a weighted average rate of 4.28%, while money parked in the SDF window stood at ₹4.52 lakh crore on Monday. On Tuesday, the volume in TREPS stood at ₹4.58 lakh crore, with an average rate of 4.38%.
In April 2025, banks had parked a record of ₹4.13 lakh crore in SDF, the highest level seen up to that point. The SDF rate is the lower (floor) rate of the LAF corridor at 5%, while the marginal standing facility (MSF) rate is the upper (ceiling) rate at 5.50%. The policy repo rate is in the middle of the corridor at 5.25%.