RBI's Marginal Standing Facility (MSF) Rate
RBI's MSF Policy Latest Update
Latest Release
April 9, 2025
Actual
6.25%
Previous
6.5%
- After assessing the current and changing macroeconomic situation, the MPC decided to reduce the policy MSF rate by 25 basis points to 6.25 percent with immediate effect.
- The decision was taken by the Monetary Policy Committee (MPC) held its 54th meeting from April 7 to 9, 2025.
- This is a significant change by the RBI after seeing India’s growth and GDP data.
Historical RBI's MSF Data Chart
Marginal Standing Facility (MSF) Chart - Historical & Current Trends
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RBI's Marginal Standing Facility (MSF) Rate overview
MSF is a facility that commercial banks use. Banks (govt and private) can borrow funds overnight against their Statutory Liquidity Ratio (SLR) securities when interbank liquidity is scarce. It was introduced in 2011-12 to help financial institutions manage short term liquidity problems.
Banks use it as an emergency funding option. The interest rate on MSF (MSF Rate) is higher than the repo rate to discourage banks from using it frequently.
The MSF aims to maintain stability in the banking system, manage short-term liquidity fluctuations, and avoid financial crisis.
Borrowing under MSF allows banks to use their SLR securities, which is not permitted when borrowing under the Repo Rate.
Features Marginal Standing Facility (MSF) Rate
- It has a higher Interest Rate so the MSF rate is kept higher than the repo rate to prevent overuse.
- It’s emergency borrowing so banks use MSF only when they cannot borrow from other sources.
- To borrow money from the RBI banks must keep collateral with the RBI.
- It’s known as an overnight Loan and banks must pay the money borrowed under MSF the next working day.
Impact of Marginal Standing Facility (MSF) Rate
Increase in MSF Rate: Borrowing becomes expensive for banks and banks may increase loan interest rates, making loans costlier for the public.
Decrease in MSF Rate: Banks can borrow money at a lower cost and loans become cheaper for individuals and businesses. It also helps boost economic activity.
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Important
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FAQs
What is the Marginal Standing Facility (MSF)?
The Marginal Standing Facility (MSF) is like a safety cushion set up by the Reserve Bank of India (RBI) to support banks when they face sudden cash crunches. Through this, scheduled commercial banks can borrow funds overnight by pledging government securities.
What is the difference between repo rate and marginal standing facility?
The repo rate is basically the interest rate at which banks can borrow money from the RBI using government securities under regular circumstances. On the other hand, the Marginal Standing Facility (MSF) rate is a bit higher and comes into play during emergencies when banks are dealing with severe cash crunches.
How does the MSF impact the economy?
The Marginal Standing Facility (MSF) serves as a cap for short-term interest rates in the money market, acting like a gentle nudge from the RBI to encourage banks to borrow only when necessary and to handle liquidity more thoughtfully. By setting this higher-than-usual rate, the RBI signals how it plans to manage liquidity while also shaping interest rate trends across the economy. It’s a way the central bank keeps things steady, ensuring the financial system stays balanced and resilient.