What is Marginal Standing Facility (MSF)?

Marginal Standing Facily or MSF is the rate at which banks borrow from the RBI against approved government securities overnight. Introduced in 2011, this funding window helps lenders fend off any emergency and maintain a cash flow. MSF rate is, however, higher than that of the repo rate.

The policy repo rate now stands at 4.90% post the June 8 hike. The MSF has been raised by 50 bps and now stands at 5.15%. Do note that the central bank is not obligated to lend money under MSF. It has all the rights on its execution.


Why should you be interested?

A higher MFS rate implies banks will have to borrow at higher rate, which can have trickle down effect on retail loans such as home and car loans. It has the exact opposite effect when MSF rates are slashed.

It can't be kept low because the RBI needs to make sure it is aligned with growth goals.