What changed
The Marginal Standing Facility rate was cut by 50 basis points to 9.00% from 9.50%, effective October 7, 2013. No other terms or conditions of the MSF scheme were modified.
What it means for you
Banks can now borrow overnight from the RBI at a lower rate of 9.00% against approved government securities, reducing their emergency funding costs. This may ease short-term liquidity pressures and slightly lower the overall cost of funds for lenders. However, the MSF remains a penal rate above the repo rate, so its usage is still meant for exceptional circumstances.
What you must do
- Update your treasury systems and internal lending rate benchmarks to reflect the new MSF rate of 9.00%.
- Review your liquidity contingency plans to account for the lower cost of emergency borrowing.
- Communicate the rate change to your asset-liability management (ALM) team for impact assessment on funding costs.
- Ensure all branches and dealing rooms are aware of the immediate effective date of this circular.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Treasury departments, Asset-Liability Management (ALM) teams, Banks relying on MSF for overnight liquidity
What is the new MSF rate and when does it take effect?
The MSF rate is reduced to 9.00% from 9.50%, effective immediately from October 7, 2013.
Are there any other changes to the MSF scheme?
No, all other terms and conditions of the MSF scheme remain unchanged as per the circular.
Who is covered by this circular?
All Scheduled Commercial Banks, excluding Regional Rural Banks (RRBs), are covered.