Current · Source: Reserve Bank of India · RBI/2021-22/138 · issued 10 Dec 2021 · ~1 min read
Quick answerFrom January 1, 2022, banks can only dip into SLR up to 2% of NDTL for overnight MSF borrowing, down from the temporary 3% allowed during COVID. This reverses the emergency relaxation back to normal levels.
The rule, in the simplest words
From January 1, 2022, banks can only borrow overnight from the MSF (a special loan window from RBI) by using up to 2% of their NDTL (total deposits and borrowings) from their SLR (government bonds they must hold).
Before this change, during COVID, banks were allowed to use up to 3% of NDTL for this overnight borrowing, but that extra 1% cushion is now gone.
This means banks have less emergency money available overnight from the MSF window, so they need to plan their cash more carefully.
How it plays out — a real example
A treasury officer in Indore, Priya, manages her bank's daily cash needs. On January 2, 2022, she realizes the bank is short on funds for the night. She checks the new rule: she can only borrow from the MSF by using 2% of NDTL from SLR, not the 3% she relied on during COVID. She quickly calls her treasury team to adjust their liquidity plan, ensuring they don't run out of cash unexpectedly.
What changed
The temporary COVID-era relaxation allowing banks to borrow under MSF by dipping into SLR up to 3% of NDTL is being withdrawn. Effective January 1, 2022, the dip limit reverts to the normal 2% of NDTL for overnight MSF borrowing.
What it means for you
Banks will have less headroom to use SLR securities for overnight liquidity from the MSF window, tightening a key liquidity buffer. Lenders relying on this facility for short-term funding must adjust their liquidity planning, as the available cushion shrinks by one percentage point of NDTL.
What you must do
Review your liquidity contingency plans to account for the reduced MSF dip limit from January 1, 2022.
Recalibrate your SLR holdings and NDTL projections to ensure compliance with the 2% cap on MSF borrowing.
Communicate the change to treasury and ALM teams to avoid any last-minute funding gaps.
Monitor overnight call money and repo rates for potential volatility as the window narrows.
Who it affects
All scheduled banks, Treasury departments, ALM and liquidity risk managers
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Why is RBI reducing the MSF dip limit from 3% to 2%?
The 3% limit was a temporary COVID-19 relaxation to ease liquidity stress. With conditions normalizing, RBI is returning to the standard 2% dispensation as announced in the Governor's statement on December 8, 2021.
When does the new 2% limit take effect?
The change is effective from January 1, 2022. Banks must comply with the reduced dip of 2% of NDTL for overnight MSF borrowing from that date.
Does this affect any other SLR-related requirements?
No, this circular only changes the MSF dip limit. Other SLR maintenance requirements under Section 24 of the Banking Regulation Act, 1949 remain unchanged.
📜 Read the original circular — full text as issued by RBI
RBI/2021-22/138
DOR.RET.REC.73/12.01.001/2021-22
December 10, 2021
All Scheduled Banks
Madam/Sir,
Section 24 of the Banking Regulation Act, 1949 – Maintenance of Statutory Liquidity Ratio (SLR) – Marginal Standing Facility (MSF) - return to the normal dispensation
Please refer to circular DOR.RET.REC.36/12.01.001/2021-22 dated August 09, 2021 and paragraph 15(i) of the Master Direction DOR.No.RET.REC.32/12.01.001/2021-22 dated July 20, 2021 , on Marginal Standing Facility (MSF), wherein the banks were allowed to avail of funds under the MSF by dipping into the Statutory Liquidity Ratio (SLR) up to three per cent of their net demand and time liabilities (NDTL) outstanding at the end of the second preceding fortnight. This facility, which was initially available up to June 30, 2020, was later extended up to December 31, 2021 vide circular DOR.RET.REC.36/12.01.001/2021-22 dated August 09, 2021 .
2. As announced in the Governor’s Statement dated December 08, 2021 , it is proposed to return to the normal dispensation. Accordingly, banks will be able to dip into the Statutory Liquidity Ratio (SLR) up to two percent of NDTL instead of three percent for overnight borrowing under the MSF with effect from January 1, 2022.
Yours faithfully,
(Thomas Mathew)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2021-22/138 · issued 10 Dec 2021. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (All scheduled banks, Treasury departments, ALM and liquidity risk managers), your first concrete step on “MSF Dip into SLR Reduced to 2% from Jan 1, 2022” is: “Review your liquidity contingency plans to account for the reduced MSF dip limit from January 1, 2022.” (RBI issued this 10 Dec 2021).
Circular: RBI/2021-22/138 -- MSF Dip into SLR Reduced to 2% from Jan 1, 2022
Issued: 10 Dec 2021
Action required: Review your liquidity contingency plans to account for the reduced MSF dip limit from January 1, 2022.
Action required: Recalibrate your SLR holdings and NDTL projections to ensure compliance with the 2% cap on MSF borrowing.
Action required: Communicate the change to treasury and ALM teams to avoid any last-minute funding gaps.
Action required: Monitor overnight call money and repo rates for potential volatility as the window narrows.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
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.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
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=12207&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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