The LAF corridor: the Marginal Standing Facility rate as ceiling and the Standing Deposit Facility rate as floor

Background

The Reserve Bank's liquidity adjustment facility, or LAF, is the set of operations through which it injects liquidity into, or absorbs liquidity from, the banking system.
The LAF corridor has the marginal standing facility rate as its upper bound or ceiling and the standing deposit facility rate as its lower bound or floor, with the policy repo rate in the middle of the corridor.
The marginal standing facility rate is placed at 25 basis points above the policy repo rate, and the standing deposit facility rate is placed at 25 basis points below it.
Under the marginal standing facility a bank may borrow overnight from the Reserve Bank by dipping into its statutory liquidity ratio portfolio up to a predefined limit of 2 per cent.
The standing deposit facility, introduced in April 2022, accepts uncollateralised overnight deposits and replaced the fixed reverse repo rate as the floor of the corridor.
The Bank Rate is published under section 49 of the Reserve Bank of India Act, 1934, and changes automatically whenever the marginal standing facility rate changes.
The cash reserve ratio is the average daily balance a bank must maintain with the Reserve Bank as a per cent of its net demand and time liabilities.
The operating target of the framework is the weighted average call rate.