What changed
The MSF borrowing limit below the stipulated SLR was increased from 2% to 2.5% of NDTL. The additional 0.5% is available only for the Special Repo Window aimed at mutual fund liquidity, effective July 17, 2013, until further notice.
What it means for you
Banks can now access more liquidity against SLR securities specifically to support mutual funds during stress. This eases pressure on banks to manage short-term funding for mutual funds without breaching SLR norms. The temporary nature requires banks to monitor RBI announcements for withdrawal.
What you must do
- Update internal MSF borrowing limits to reflect the new 2.5% of NDTL cap, noting the 0.5% earmarked for the Special Repo Window.
- Ensure treasury teams are aware of the temporary nature and track RBI circulars for any changes.
- Coordinate with mutual fund desks to utilize the additional window for liquidity requirements.
- Review SLR portfolio to identify eligible securities for MSF collateral under the enhanced limit.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Treasury departments, Mutual funds and their liquidity managers, RBI's monetary operations team
What is the new MSF borrowing limit under this circular?
The limit is raised to 2.5% of NDTL, but the extra 0.5% is only for the Special Repo Window for mutual funds.
Is this change permanent?
No, it is temporary until further notice. Banks should stay alert for RBI updates.
Can we use the additional 0.5% for general liquidity needs?
No, it is restricted to the Special Repo Window for mutual fund liquidity requirements only.