Lawstreet Journal

RBI to Extend Enhanced Borrowing Limit till 30th September under MSF

Lawstreet Journal 30 Jun 2020 12:34am

Image courtesy: Lawstreet Journal Executive RBI to Extend Enhanced Borrowing Limit till 30th September under MSF

The Reserve Bank of India announced on Saturday, 27th June 2020, that it will extend the enhanced borrowing facility provided to the banks to meet their liquidity shortages till 30th September 2020. 

The move has been taken in the view of the economic woes created by the coronavirus pandemic. RBI has now raised the borrowing cap for scheduled banks under the marginal standing facility (MSF) scheme from 2 percent to 3 percent of their Net Demand and Time Liabilities (NDTL) with effect from 27th March 2020. 

Under the MSF, banks can borrow funds overnight, at their discretion, by entering the statutory liquidity ratio (SLR). This relaxation, which was granted until 30th June 2020, has now been extended until 30th September 2020. 

A circular released by the Reserve Bank of India said, “On a review, it has now been decided to extend this enhanced limit till September 30, 2020.” The circular added, “Banks may continue to access overnight funds under the MSF against their excess SLR holding.” 

The marginal facility rate presently stands at 4.25 percent. The RBI also extended the relaxation of the minimum regular maintenance of the Cash Reserve Ratio (CRR) to 80 percent for a total duration of three months until 25th September 2020. 

On 27 March, the minimum daily maintenance of the CRR was reduced from 90% of the approved CRR to 80 percent till 26th June 2020. It was done in the light of the continued challenges encountered by banks in terms of the social distancing of staff and the consequent… Continue Reading...

Tagged: Reserve Bank of India Act  
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