Introduction of Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) for Regional Rural Banks (RRBs)

Last updated: 05 December 2020

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The Reserve Bank of India has introduced the Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) for eligible Regional Rural Banks (RRBs). This initiative aims to provide RRBs with an additional method for managing their liquidity. To be eligible, RRBs must have implemented a Core Banking Solution (CBS), maintain a minimum CRAR of nine per cent, and comply with RBI's terms for LAF and MSF.

RBI/2020-21/76
DOR.RRB.No.28/31.01.001/2020-21

December 4, 2020

All Regional Rural Banks

Madam/ Sir,

Introduction of Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) for Regional Rural Banks (RRBs)

In order to provide an additional avenue for liquidity management to Regional Rural Banks (RRBs), it has been decided that Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) will be extended to Scheduled RRBs meeting the following criteria:

Implemented Core Banking Solution (CBS)
There is a minimum CRAR of nine per cent and
Fully compliant with the terms and conditions for availing LAF and MSF issued by Financial Markets Operations Department (FMOD), Reserve Bank of India.

2. The names of RRBs which meet the eligibility norms to participate in LAF and MSF (Positive List) and of those RRBs found ineligible (Negative List) will be intimated to the banks concerned. The eligibility status of the banks will be reviewed on an ongoing basis.

3. The effective date from which the RRBs will be eligible to avail of LAF and MSF will be intimated separately.

Yours faithfully,

(Thomas Mathew)
Chief General Manager

FAQ :

The Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) are being introduced for eligible Regional Rural Banks (RRBs).

The purpose is to provide an additional avenue for liquidity management to Regional Rural Banks (RRBs).

RRBs must have implemented a Core Banking Solution (CBS), have a minimum CRAR of nine per cent, and be fully compliant with the terms and conditions for availing LAF and MSF issued by the Financial Markets Operations Department (FMOD).

No, only Scheduled RRBs meeting specific criteria will be eligible. The RBI will provide lists of eligible and ineligible RRBs.

The RBI will intimate the concerned banks about their eligibility status, which will be reviewed on an ongoing basis.

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Notification No : RBI/2020-21/76 DOR.RRB.No.28/31.01.001/2020-21
Published in Community & General
Source : https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12004&Mode=0

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