The RBI Governor has recently announced the reduction of the important policy rates on 22 May 2020 at a monetary policy review meeting. The implication is that if a bank has at least 18% of deposits in the form of SLR eligible securities, (when the SLR is 19%), the bank can get loans under MSF or there will not be any disciplinary action. In case the second leg falls on a holiday, the reversal date is the next working day.RBI introduced Straight Through Processing (STP) MSF operations with effect from August 3, 2015. The MSF or Marginal Standing Facility (MSF) Rate is the rate at which RBI lends funds overnight to scheduled banks, against government securities. This enables eligible participants to receive the credit or debit immediately on placement of the bids or offers, subject to the availability of the collateral or funds, within the prescribed time window. The MSF rate is pegged 100 basis points or a percentage point above the repo rate. Accordingly, the applicant’s current account is credited with the MSF application amount. Accrued interest as on the date of transaction is ignored for the purpose of pricing of securities.A margin of 5 per cent is applied in respect of GoI dated securities and Treasury Bills. But the main condition is that for such borrowings the bank has to give higher interest rate to the RBI. Sometimes the RBI increases the limit of borrowings to 2% of NDTL. One crore and in multiples of Rs. But later, with the gradual reduction of the repo rate, the MSF rate has been brought closer to the repo rate. This website is an intellectual property of Pepco Infotech Pvt. In the case MSF, banks can borrow funds up to one percentage of their NDTL, at a rate of one percentage higher than the repo rate. one crore thereafter.8. RBI has introduced this borrowing scheme to regulate short-term asset liability mismatch in a more effective manner. Most popular of these measures is the ‘work horse’ liquidity support arrangement called repo (repo comes under the RBI’s umbrella liquidity management mechanism called             The Liquidity Adjustment Facility has repo and term repo as the major liquidity injecting instruments. Oil Bonds issued by Government of India also qualify as eligible securities for Marginal Standing Facility (MSF).Pricing of all securities including Treasury Bills is taken at face value for MSF operations by Reserve Bank. It takes a certain amount of knowledge of economics to begin understanding what RBI Repo Rate means and how it affects us, the common people.


In April 2016, RBI narrowed the policy rate corridor from +/-100 basis points (bps) to +/- 50 bps, thus MSF was fixed at 50 basis points above repo rate.
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Then, what the bank can do to get immediate money from the RBI? In April 2016, RBI narrowed the policy rate corridor from +/-100 basis points (bps) to +/- 50 bps, thus MSF was fixed at 50 basis points above repo rate. The rate of interest on MSF is above 100 bps above the Repo Rate. Banks can borrow from the RBI up to 1 % of their Net Demand and Time Liabilities or liabilities (or deposits) under MSF (increased to 2% later). The transactions undertaken by a participant is final and hence request for cancellation of bids or offers is not entertained.You pay Rs. The rate of interest and amount of borrowing can change depending upon the monetary policy decisions by the RBI. Mechanics of operations: The requests will be submitted electronically in the Negotiated Dealing System (NDS).

Repo rate is 6.0% whereas the MSF rate is 6.25%. The interest rate for MSF borrowing can be decided by the RBI from time to time, and it was originally set at one percent higher than the repo rate. Under MSF, banks can borrow funds from the RBI by pledging government securities within the limits of the SLR. If there is no security holding over the SLR, banks can’t get loans under repo facility.

The working of repo thus necessitates that there should be eligible securities with the bank to avail money from the RBI by pledging them. On acceptance of MSF requests, the applicant’s Repo Constituents’ Subsidiary General Ledger Account (RC SGL) is debited by the required quantum of securities and credited to Bank’s RC SGL Account. in May 2011 it was decided by RBI that the rate of interest on amount availed under this facility will be 100 basis points above the LAF repo rate, or as decided by the Reserve Bank from time to time.

This means that Difference between Repo Rate and MSF is 200 Basis Points. Both the MSF rate and Bank rate are equal. Significance (out of the implication of clauses) of MSF is that it can be availed even if the latter doesn’t have the required eligible securities above the SLR limit. Eligibility: All Scheduled Commercial Banks having Current Account and SGL Account with Reserve Bank, will be eligible to participate in the MSF Scheme.

Both the MSF rate and Bank rate are equal. Discretion to Reserve Bank: The Reserve Bank will reserve the right to accept or reject partially or fully, the request for funds under this facility.6. Under LAF Repo, banks can borrow from RBI at the Repo rate by pledging government securities over and above the statutory liquidity requirements. Marginal Standing Facility (MSF) Rate Comparision Chart Rate of Interest: The rate of interest on amount availed under this facility will be 100 basis points (originally set) above the LAF repo rate, or as decided by the Reserve Bank from time to time (reduced by the RBI later).5. Difference between the Repo rate and the MSF rate can be changed in accordance with the policy perspective of the RBI. The banks can borrow up to 1 percent of their net demand and time liabilities (NDTL) from this facility. The working of MSF is thus is indirectly related with SLR. MSF requests have to be received by RBI for a minimum amount of Rs. Eligible members facing genuine system problem on any specific day, may submit physical requests in sealed cover in the box provided in the Mumbai Office,7.