Borrowing Limit under MSF extended

Why is it in news?
  • The Reserve Bank has decided to extend by six months the enhanced borrowing facility provided to banks to meet the shortage of liquidity till March 31, 2021.
  • The move comes in the wake of ongoing economic woes created by the COVID-19 pandemic.
Background:
  • As a temporary measure, the RBI had increased the borrowing limit for scheduled banks under the marginal standing facility (MSF) scheme.
  • The borrowing limit under MSF was increased from 2% to 3% of their net demand and time liabilities (NDTL) with effect from March 27, 2020.
Marginal Standing Facility(MSF):
  • 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.
  • The MSF rate is pegged 100 basis points or a percentage point above the repo rate.
  • MSF was launched by RBI in 2011-12.




Posted by Jawwad Kazi on 29th Sep 2020