What is MSF?

Hi, 

You might have come across the term MSF and haven't been able to figure out what MSF means. Well, here is an explanation in layman's terms. 

MSF, also known as Marginal Standing Facility, is a policy that the Reserve Bank Of India has put forward to help banks that are in urgent need of money. But it does come with a disadvantage, which is a high-interest rate. The reason is that this needs to be used only during absolute emergencies. 

Criteria For Burrowing MSF

Now that you are aware of what is the meaning of MSF, here are the criterias that need to be fulfilled before burrowing MSF. 

• Though the allowed amount is ₹1Cr but banks need to avail in multiples of crores. 

• An application needs to be submitted electronically beforehand. MSF can only be availed by scheduled commercial banks. 

• Through MSF, banks can borrow money from RBI headquarters in Mumbai. 

• Expert for Saturdays, the money can be borrowed on any of the working days between 3:30 pm to 4:40 pm. 

Hopefully, now you understand what MSF means. To know more about the MSF rates, etc., check the answer provided by Onen. 

If you are in search of the question of what is MSF in banking, then you have come to the right place. 

Marginal Standing Facility, or MSF, is a vital term used by central bank to control liquidity in the banking system. This facility offers banks the option of borrowing money from the RBI (Reserve Bank of India) in times of crisis when their liquidity is completely exhausted. By providing authorised government securities, this short-term borrowing arrangement enables the scheduled banks to obtain funds from RBI overnight in the case of a serious cash shortfall. Scroll down to know more about MSF.

What is MSF Rate?

• As the MSF rate is always set higher than the repo rate, banks must pay more to borrow. 

• The Monetary Policy Committee (MPC) has opted to cut the Repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 6.50 percent to 6.25 percent with immediate effect, as stated in Fourth Bi-Monthly Monetary Policy Statement.

• The Marginal Standing Facility (MSF) rate will be modified to 6.75 percent with immediate effect in response to the revision in the Repo rate.

Overall, the MSF is essential to assuring the banking system runs smoothly and preserving economic stability. I hope you found this helpful.