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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.