Sunday, 6 March 2016

What is the difference between liquidity adjustment facility-repo rate and marginal standing facility(MSF) rate of RBI?

What is the difference between liquidity adjustment 

facility-repo rate and marginal standing facility(MSF)

 rate of RBI?


Under LAF - Repo rate, Banks can borrow from RBI at the Repo -rate by pledging government securities over and above the statutory liquidity requirements.
However, in case of borrowing from the marginal standing facility(MSF), banks can borrow funds up to two percentage of their net demand and time liabilities, at the rates announced by RBI and this can be within the statutory liquidity ratio of 21.5%.
The rate of interest payable by banks is less in case of Repo facility than the borrowing availed under MSF i.e. we can say MSF borrowing is costlier for the banks than the borrowing under Repo Rate.
At present MSF rate is 1% higher than REPO rate.
Anil Aggarwal
Owner & Manager at Anil Aggarwal Coaching
(A proprietorship concern for IBPS exam guidance and Bank Interview preparation)
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