What changed
The borrowing limit under the Marginal Standing Facility (MSF) for scheduled commercial banks was increased from 1% to 2% of their net demand and time liabilities (NDTL). This change was announced in the Annual Monetary Policy Statement 2012-13 and took immediate effect from April 17, 2012.
What it means for you
Banks now have access to a larger liquidity buffer through the MSF, allowing them to borrow more overnight funds against their excess SLR holdings. This provides greater flexibility in managing short-term liquidity mismatches without dipping into other reserves.
What you must do
- Update internal liquidity management policies to reflect the new 2% MSF borrowing limit.
- Ensure SLR portfolio is structured to support potential MSF borrowing up to 2% of NDTL.
- Train treasury and risk teams on the revised MSF access rules and collateral requirements.
- Monitor fortnightly NDTL data to accurately calculate the available MSF borrowing capacity.
Who it affects
Scheduled Commercial Banks (excluding Regional Rural Banks), Treasury departments, Risk management teams, Liquidity planners
What is the effective date of this MSF limit increase?
The increase from 1% to 2% of NDTL took immediate effect from April 17, 2012, as announced in the Annual Monetary Policy Statement.
Can banks still use excess SLR holdings as collateral for MSF?
Yes, banks can continue to access overnight funds under the MSF against their excess SLR holdings, as per the earlier circular dated December 21, 2011.
Does this change apply to Regional Rural Banks?
No, this circular applies to all Scheduled Commercial Banks excluding Regional Rural Banks.