Home › Circulars › RBI/2011-2012/396

Bank Rate Hiked 350 bps to 9.50%: Technical Alignment with MSF

Current · Source: Reserve Bank of India · RBI/2011-2012/396 · issued 13 Feb 2012 · ~2 min read
Quick answerRBI raised the Bank Rate by 350 bps to 9.50% effective Feb 13, 2012, aligning it with the MSF rate. This is a one-time technical adjustment, not a monetary policy change. Penal rates on reserve shortfalls also increase accordingly.
The rule, in the simplest words
How it plays out — a real example

A treasury officer in Indore, Mr. Kumar, needs to update the interest rates for his customers' loans, which are linked to the Bank Rate. He must revise the penal interest rates for shortfalls in CRR/SLR requirements to 12.50% and 14.50% respectively, as per the new Bank Rate of 9.50%.

What changed

The Bank Rate was increased from 6.00% to 9.50% per annum, a hike of 350 basis points, effective from close of business on February 13, 2012. This aligns the Bank Rate with the Marginal Standing Facility (MSF) rate, which is 100 bps above the policy repo rate. Penal interest rates on shortfalls in CRR/SLR requirements, linked to the Bank Rate, have also been revised upward as per the annex.

What it means for you

For banks, this is a technical recalibration—not a signal of tighter monetary policy. The Bank Rate now matches the MSF rate, which already served as the penal rate for reserve shortfalls. Penal interest on CRR/SLR deficiencies will rise: from Bank Rate +3% (9%) to +3% (12.50%), and from +5% (11%) to +5% (14.50%). Lenders using the Bank Rate as a reference for indexation must update their contracts and systems.

What you must do

Who it affects

All scheduled commercial banks, Treasury and risk management departments, Lending and deposit operations teams, Borrowers with loans linked to Bank Rate, Organizations using Bank Rate for indexation

❓ Common questions

Regulatory timeline

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Why did RBI raise the Bank Rate by 350 bps if it's not a monetary policy change?

This is a one-time technical adjustment to align the Bank Rate with the MSF rate, which has been operational since May 2011. The Bank Rate had remained unchanged at 6% since 2003, while the MSF rate (policy repo rate + 100 bps) was higher. The hike brings the Bank Rate in line with current market realities without signaling a change in monetary stance.

How will this affect penal rates on reserve shortfalls?

Penal interest rates on CRR/SLR shortfalls, which are linked to the Bank Rate, will increase. For shortfalls of up to two days, the rate moves from Bank Rate +3% (9%) to Bank Rate +3% (12.50%). For longer shortfalls, it moves from Bank Rate +5% (11%) to Bank Rate +5% (14.50%).

Should banks expect any change in the policy repo rate or MSF rate due to this?

No. The RBI explicitly states this is not a change in monetary policy stance. The policy repo rate and MSF rate remain unaffected. The Bank Rate adjustment is purely to align it with the existing MSF rate for operational consistency.

📜 Read the original circular — full text as issued by RBI
Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Home About Us ▼ About Us Organisation & Functions ▶ Organisation Structure Departments Offices Training Establishment ▶ College of Agricultural Banking Reserve Bank Staff College College of Supervisors RBI's Functions and Working Governors Deputy Governors Executive Directors Communication Policy of RBI Sources of Information ▶ Annual Publications Half-yearly Publications Quarterly Publications Monthly Publications Weekly Publications Occasional Publications SDDS NSDP Data Releases Publications available on Subscription General Information RBI History Museum ▶ The RBI Museum RBI Monetary Museum Notification ▼ Notifications Master Directions Master Circulars Amendment Directions Draft Notifications/Guidelines ▶ Draft Notifications/Guidelines Draft Directions (RE-wise) Index To RBI Circulars Standalone Circulars Circulars Withdrawn Press Releases Speeches & Media Interactions ▼ Speeches Media Interactions Memorial Lectures Podcasts Publications ▼ Biennial Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Working Papers Legal Framework ▼ Act Rules Regulations Schemes Research ▼ External Research Schemes RBI Occasional Papers Working Papers RBI Bulletin History DRG Studies KLEMS State Statistics and Finances Statistics ▼ Data Releases Database on Indian Economy Public Debt Statistics Regulatory Reporting ▼ List of Returns Data Definition Validation rules/ Taxonomy List of RBI Reporting Portals FAQs of RBI Reporting Portals Home Notifications Notifications ( 21 kb ) Bank Rate RBI/2011-2012/396 Ref.No.MPD.BC.352/05.03.004/2011-12 February 13, 2012 Magha 24, 1933 (Saka) To All Scheduled Commercial Banks Bank Rate Section 49 of the Reserve Bank of India Act, 1934 requires the Reserve Bank to make public (from time to time) the standard rate at which it is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase under that Act. 2. Being the discount rate, the Bank Rate should technically be higher than the policy repo rate. The Bank Rate has, however, been kept unchanged at 6 per cent since April 2003. This was mainly for the reason that monetary policy signalling was done through modulations in the reverse repo rate and the repo rate under the Liquidity Adjustment Facility (LAF) (till May 3, 2011) and the policy repo rate under the revised operating procedure of monetary policy (from May 3, 2011 onwards). Moreover, under the revised operating procedure, marginal standing facility (MSF), instituted at 100 basis points above the policy repo rate, has been in operation, which in many ways serves the purpose of the Bank Rate. 3. While the policy repo rate and the MSF rate have become operational, the Bank Rate continues to remain at 6 per cent. Currently, the Bank Rate acts as the penal rate charged on banks for shortfalls in meeting their reserve requirements (cash reserve ratio and statutory liquidity ratio). The Bank Rate is also used by several other organisations as a reference rate for indexation purposes. 4. The Reserve Bank has consulted various organizations/stakeholders relying on the Bank Rate as a reference rate. Based on the feedback received, it is determined that the Bank Rate should normally stay aligned to the MSF rate. Accordingly, it has been decided that with effect from the close of business today (February 13, 2012), the Bank Rate will stand increased by 350 basis points, i.e., from 6.00 per cent per annum to 9.50 per cent per annum. This should be viewed and understood as one-time technical adjustment to align the Bank Rate with the MSF rate rather than a change in the monetary policy stance. 5. All penal interest rates on shortfall in reserve requirements, which are specifically linked to the Bank Rate, will also stand revised as indicated in the Annex . 6. Kindly acknowledge receipt of this letter to the Adviser-in-Charge, Monetary Policy Department, Reserve Bank of India, Central Office, Shahid Bhagat Singh Road, Mumbai 400 001. D. Subbarao Governor Annex Penal Interest Rates which are linked to the Bank Rate Item Existing Rate New Rate (Effective close of business on February 13, 2012) Penal interest rates on shortfalls in reserve requirements (depending on duration of shortfalls). Bank Rate plus 3.0 percentage points (9.00 per cent) or Bank Rate plus 5.0 percentage points (11.00 per cent). Bank Rate plus 3.0 percentage points (12.50 per cent) or Bank Rate plus 5.0 percentage points (14.50 per cent). Related Press Release Feb 13, 2012 RBI raises Bank Rate as a Technical Adjustment 2026 All Months January February March April May June July August September October November December 2025 All Months January February March April May June July August September October November December 2024 All Months January February March April May June July August September October November December 2023 All Months January February March April May June July August September October November December 2022 All Months January February March April May June July August September October November December 2021 All Months January February March April May June July August September October November December 2020 All Months January February March April May June July August September October November December 2019 All Months January February March April May June July August September October November December 2018 All Months January February March April May June July August September October November December 2017 All Months January February March April May June July August September October November December Archives 2016 All Months January February March April May June July August September October November December 2015 All Months January February March April May June July August September October November December 2014 All Months January February March April May June July August September October November December 2013 All Months January February March April May June July August September October November December 2012 All Months January February March April May June July August September October November December 2011 All Months January February March April May June July August September October November December 2010 All Months January February March April May June July August September October November December 2009 All Months January February March April May June July August September October November December 2008 All Months January February March April May June July August September October November December 2007 All Months January February March April May June July August September October November December 2006 All Months January February March April May June July August September October November December 2005 All Months January February March April May June July August September October November December 2004 All Months January February March April May June July August September October November December 2003 All Months January February March April May June July August September October November December 2002 All Months January February March April May June July August September October November December 2001 All Months January February March April May June July August September October November December 2000 All Months January February March April May June July August September October November December 1999 All Months January February March April May June July August September October November December 1998 All Months January February March April May June July August September October November December 1997 All Months January February March April May June July August September October November December 1996 All Months January February March April May June July August September October November December 1995 All Months January February March April May June July August September October November December 1994 All Months January February March April May June July August September October November December 1993 All Months January February March April May June July August September October November December 1992 All Months January February March April May June July August September October November December 1991 All Months January February March April May June July August September October November December Top Back to previous page More Links Bank Holidays Banking Glossary Citizen's Charter Complaints Contact Us COVID-19 Measures E-LMS Events FAQs Financial Education Forms IFSC/MICR Codes Important Websites Opportunities @ RBI RBI Clarifications RBI Kehta Hai RBI’s Vision and Values (1257 kb)--> Right to Information Act Tenders Follow RBI RSS Twitter YouTube Instagram Facebook LinkedIn © Reserve Bank of India. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-2012/396 · issued 13 Feb 2012. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
💻 IT / Systems
  • Update internal systems and loan contracts that reference the Bank Rate to reflect the new 9.50% rate.
📜 Compliance
  • Revise penal interest calculations for CRR/SLR shortfalls to the new rates (12.50% or 14.50% as applicable).
  • Communicate the change to treasury and risk management teams to avoid mispricing of linked instruments.
  • Review any external agreements (e.g., with other organizations) that use the Bank Rate as a benchmark.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are an IT/Systems lead at a bank this circular applies to (All scheduled commercial banks, Treasury and risk management departments, Lending and deposit operations teams, Borrowers with loans linked to Bank Rate, Organizations using Bank Rate for indexation), your first concrete step on “Bank Rate Hiked 350 bps to 9.50%: Technical Alignment with MSF” is: “Update internal systems and loan contracts that reference the Bank Rate to reflect the new 9.50% rate.” (RBI issued this 13 Feb 2012).

  1. Circular: RBI/2011-2012/396 -- Bank Rate Hiked 350 bps to 9.50%: Technical Alignment with MSF
  2. Issued: 13 Feb 2012
  3. Action required: Update internal systems and loan contracts that reference the Bank Rate to reflect the new 9.50% rate.
  4. Action required: Revise penal interest calculations for CRR/SLR shortfalls to the new rates (12.50% or 14.50% as applicable).
  5. Action required: Communicate the change to treasury and risk management teams to avoid mispricing of linked instruments.
  6. Action required: Review any external agreements (e.g., with other organizations) that use the Bank Rate as a benchmark.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7001&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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