What changed
Previously, banks could only access MSF against excess SLR holdings. Now, they can also borrow overnight up to 1% of their NDTL even if it pushes their SLR below the statutory minimum, and no separate waiver is required for that SLR default.
What it means for you
This gives banks more flexibility to manage sudden liquidity crunches without breaching SLR compliance formally. Lenders can now use a small portion of their statutory SLR buffer as a funding source, reducing the need for costly market borrowing or penal actions.
What you must do
- Update your MSF borrowing procedures to include the new 1% SLR dip option.
- Monitor NDTL fortnightly to calculate the exact headroom available under this facility.
- Ensure your treasury team is aware that no separate SLR waiver application is needed for this usage.
- Review liquidity contingency plans to incorporate this additional funding avenue.
Who it affects
All scheduled commercial banks, Treasury departments, ALM and liquidity risk teams
Can we borrow under MSF for more than one day?
No, the facility is strictly overnight as per the circular.
Do we need to report the SLR shortfall separately to RBI?
No, the circular explicitly states that no specific waiver is required for the SLR default arising from this facility.