RBI's Marginal Standing Facility (MSF) Rate
RBI's MSF Policy Latest Update
Latest Release
Feb 7, 2025
Actual
6.5%
Previous
6.75%
Current Marginal Standing Facility (MSF) Rate: The current MSF Rate is 6.50%.
On 7th Feb 2024, the RBI reduced the MSF rate by 25 basis points. 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
Analyze MSF Changes Over Time
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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