The BOM’s standing facilities are deals to cover temporary reserve deficits on the interbank market or immerse the surplus into the market. Deals should be performed by requests of banks on pre-determined rates. The BOM’s standing facilities include intraday lending, overnight repo financing and overnight deposit. Interest rate levels of overnight repo and overnight deposit depend on the policy rate and are determined as follows:
- Overnight repo financing rate = Policy rate + 1 percentage points
- Overnight deposit rate = Policy rate - 1 percentage point
- Intraday loan=0%
A day loan
The BOM introduced RTGS (Real time gross settlement) in order to reduce interbank settlement risks and expedite interbank transactions. The launch of RTGS required the BOM to create intraday loan facility. Intraday loans are repaid on the same day and used only for ensuring smooth transactions and not for monetary policy purposes.
Intraday loans have no interest rate and are guaranteed by collateral assets. The collateral assets include the bills listed in the securities list developed by the Risk Management Unit of the BOM.
Standing facilities: Overnight repo financing
The BOM overnight repo financing is a loan issued to banks that do not satisfy the reserve requirement, from the closing of clearing services at banks until the opening of clearing services the following business day.
Overnight repo rate would be maximum limit of the BOM's interest rate corridor and is equal to policy rate plus 2 percentage points.
Overnight repo financing rate = Policy rate (13%) + 2.0 percentage point
Standing facilities: Overnight deposit
Overnight deposit is an instrument to mop up excess reserves of banks from the market at the end of day. These deals must be performed upon requests from banks and shall be the last transaction of the banks on that day.
Overnight deposit rate would be the lowest limit of the BOM’s interest rate corridor and is equal to policy rate minus width of the interest rate corridor.
Overnight deposit rate (11%) = Policy rate (13%) – 2.0 percentage point
Overnight deposit must be placed in special deposit accounts at the BOM and the minimum amount of overnight deposit request is 1 billion tugrugs.