What changed
The RBI extended the relaxation under Marginal Standing Facility (MSF) that permits banks to borrow funds by using up to an additional 1% of their Net Demand and Time Liabilities (NDTL) from Statutory Liquidity Ratio (SLR) holdings, cumulatively up to 3% of NDTL. This facility, initially valid until June 30, 2020 and later extended to March 31, 2021, is now further extended for six months until September 30, 2021.
What it means for you
Banks can continue to access MSF funds by dipping into SLR securities up to 3% of NDTL, easing liquidity pressures and helping meet Liquidity Coverage Ratio (LCR) requirements. This extension provides banks with additional flexibility in managing short-term liquidity without needing to sell SLR securities in the market.
What you must do
- Update internal liquidity management policies to reflect MSF relaxation validity until September 30, 2021.
- Ensure compliance with SLR maintenance while utilizing the additional 1% MSF window cumulatively up to 3% of NDTL.
- Monitor LCR requirements and leverage the MSF facility to meet liquidity needs as necessary.
- Communicate the extended timeline to treasury and risk management teams for planning.
Who it affects
All scheduled banks in India, Treasury departments, Risk management teams, Liquidity planning units
What is the total MSF borrowing limit under this relaxation?
Banks can borrow under MSF by dipping into SLR up to an additional 1% of NDTL, making the cumulative limit 3% of NDTL.
Until when is this MSF relaxation valid?
The relaxation is extended for six months from March 31, 2021, and is valid until September 30, 2021.
Does this relaxation help with LCR compliance?
Yes, the circular explicitly states that the facility enables banks to meet their Liquidity Coverage Ratio (LCR) requirements.