What changed
The MSF rate was cut from 10.25% to 9.50%, a reduction of 75 basis points. This change aligns the MSF rate at 200 basis points above the policy repo rate under the Liquidity Adjustment Facility.
What it means for you
Banks can now borrow overnight from RBI at a lower emergency rate, reducing their cost of funds during liquidity stress. This move signals RBI's intent to ease short-term funding pressures and support monetary transmission.
What you must do
- Update internal systems and loan pricing models to reflect the new MSF rate of 9.50%.
- Communicate the revised MSF rate to treasury and ALM teams for liquidity planning.
- Review borrowing strategies to optimize use of MSF versus other LAF windows.
- Acknowledge receipt of the circular to RBI as instructed.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Treasury departments, ALM and liquidity management teams
What is the new MSF rate and when does it take effect?
The MSF rate is reduced to 9.50% from 10.25%, effective immediately from September 20, 2013.
How does this change relate to the repo rate?
The MSF rate is now set at 200 basis points above the policy repo rate, recalibrating its spread under the LAF.
Are there any other changes to the MSF scheme?
No, all other terms and conditions of the MSF scheme remain unchanged.