MSF Full Form in Banking, What Does MSF Stand For?

MSF Full Form in Banking is Marginal Standing Facility. When inter-bank funding dries up altogether, banks can turn to the RBI for a loan under the margin standing facility (MSF). During the 2011โ€“12 period of monetary policy change, the Reserve Bank of India (RBI) introduced a new program called the Marginal standing facility.

When banks have exhausted all other borrowing options, they might borrow the money from RBI at a punitive rate. In order for banks to borrow funds at a rate higher than the repo rate, a facility known as Marginal Standing option exists.

Facts About MSF

  • As part of LAF, banks can borrow money from the RBI by offering up government securities as collateral and paying interest above the repo rate (liquidity adjustment facility).
  • A whole percentage point is added to the repo rate to establish the MSF rate.
  • Banks can borrow up to 1% of their gross demand and time obligations under MSF (NDTL).
  • With the exception of Saturdays, MSF is open for bank borrowing on all other business days.
  • RBI accepts applications for a minimum of Rs.1 Crore, and then in subsequent multiples exceeding Rs.1 Crore.
  • When the financial system experiences an unexpected shock to its liquidity, MSF can act as a safety valve.
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