Marginal standing facility (MSF)

Subject: Economy

Context:

The RBI, as a temporary measure, had increased the borrowing limit for scheduled banks under the marginal standing facility scheme from 2 per cent to 3 percent of their Net Demand and Time Liabilities (NDTL)

Concept:

• Marginal standing facility (MSF) is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely.
• Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under liquidity adjustment facility or LAF in short.
• The MSF rate is pegged 100 basis points or a percentage point above the repo rate.
• Under MSF, banks can borrow funds up to one percentage of their net demand and time liabilities (NDTL).