Section 24 of the Banking Regulation Act, 1949 - Maintenance of SLR - MSF - return to the normal dispensation

Last updated: 11 December 2021

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The Reserve Bank of India has announced a return to the normal dispensation for the Marginal Standing Facility (MSF) under Section 24 of the Banking Regulation Act, 1949. Effective January 1, 2022, banks will be permitted to use up to two percent of their Net Demand and Time Liabilities (NDTL) for overnight borrowing under the MSF. This replaces the previous allowance of three percent, which had been extended until December 31, 2021.

Reserve Bank of India RBI/2021-22/138 DOR.RET.REC.73/12.01.001/2021-22 December 10, 2021 All Scheduled Banks Madam/Sir, Section 24 of the Banking Regulation Act, 1949 Maintenance of Statutory Liquidity Ratio (SLR) Marginal Standing Facility (MSF) return to the normal dispensation Please refer tocircular DOR.RET.REC.36/12.01.001/2021-22 dated August 09, 2021and paragraph 15(i) of theMaster Direction DOR.No.RET.REC.32/12.01.001/2021-22 dated July 20, 2021, on Marginal Standin

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FAQ :

Effective January 1, 2022, banks will be able to dip into their Statutory Liquidity Ratio (SLR) up to two percent of their Net Demand and Time Liabilities (NDTL) for overnight borrowing under the MSF, returning to the normal dispensation.

Previously, banks were allowed to avail of funds under the MSF by dipping into the SLR up to three percent of their NDTL outstanding.

The change to the normal dispensation, allowing for two percent NDTL usage for MSF borrowing, takes effect from January 1, 2022.

This regulation is governed by Section 24 of the Banking Regulation Act, 1949.

It means returning to the standard practice where banks can use up to two percent of their NDTL for overnight borrowing under the MSF, as opposed to the temporary higher limit of three percent.

Notification No : RBI/2021-22/138 DOR.RET.REC.73/12.01.001/2021-22
Source : https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12207&Mode=0

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