The Marginal Standing Facility (MSF) is a liquidity facility offered by the Reserve Bank of India (RBI) to commercial banks in India. It is a last resort option for banks that are unable to borrow money from other banks through the normal market channels.
The MSF is available at a rate that is higher than the repo rate, which is the rate at which the RBI lends money to banks through its Liquidity Adjustment Facility (LAF). This is because the MSF is seen as a more risky option for the RBI, as it is only available to banks that are in financial difficulty.
The MSF can be used by banks to meet their short-term liquidity needs. It is typically used by banks to meet their daily cash requirements, such as paying salaries or making payments to suppliers.
The MSF is a relatively expensive option for banks, but it can be used as a last resort to avoid a liquidity crisis.
The current MSF rate in India is 4.25%. It is set by the RBI and can be changed at any time.
The MSF period is 24 hours. This means that banks can borrow money from the RBI through the MSF for a period of 24 hours. After 24 hours, the banks have to repay the money to the RBI.
The MSF is a temporary measure that is designed to help banks that are facing temporary liquidity problems. It is not a long-term solution to liquidity problems.
The MSF is an important tool that the RBI can use to manage liquidity in the banking system. It can be used to prevent a liquidity crisis and to ensure that banks have access to the money they need to operate.
Here are some of the key features of the MSF:
- It is a last resort option for banks that are unable to borrow money from other banks through the normal market channels.
- It is available at a rate that is higher than the repo rate.
- It can be used to meet short-term liquidity needs.
- It is a relatively expensive option for banks.
- The MSF period is 24 hours.
- It is a temporary measure that is designed to help banks that are facing temporary liquidity problems.