To boost liquidity, RBI further slashes MSF to 9%

In the last one month, RBI has slashed the marginal standing facility (MSF) twice in a bid to quickly rollback the emergency measures that were undertaken in July to restrict outflow of capital

GN Bureau | October 7, 2013



Having faced the ire of investors for tightening liquidity conditions earlier in July, the Reserve Bank of India (RBI) has been working on easing those conditions so as to restore market sentiment. The apex bank on Monday slashed the marginal standing facility rate by 50 basis points to 9 percent.

According to a statement released by the apex bank on Monday, "On a review of evolving liquidity conditions and in continuation of this calibrated unwinding, it has been decided to reduce the marginal standing facility (MSF) rate by a further 50 basis points from 9.5 percent to 9 percent with immediate effect."

Marginal standing facility (MSF) is a window through which banks can borrow funds overnight from the apex bank against government securities. Hence, a decline in the MSF rate would make funds available to banks at cheaper rates and this benefit could in turn be transferred to the public at large. Availability of cheap loans is critical to boost investment activity which is necessary for the continuous growth of an economy.

In the last couple of months the Indian rupee had become the most volatile currency in Asia due to the declining investor confidence and as a result, former RBI governor D Subbarao had adopted some stringent measures to restrict flow of capital from the country.

In his first monetary policy review in September, RBI governor Raghuram Rajan had begun the process of easing these liquidity tightening measures by slashing the MSF rate from 10.25 percent to 9.5 percent.

Apart from the decision to further slash this rate to 9 percent, the apex bank has also announced the provision of additional liquidity "through term repos of 7-day and 14-day period for a notified amount equivalent to 0.25 per cent of net demand and time liabilities (NDTL) of the banking system through variable rate auctions on every Friday beginning October 11, 2013."

The next monetary policy review will be announced by Rajan on October 29.
 

Comments

 

Other News

On a personal note: DIVINE

An underground rapper who grew up on Mumbai streets, Divine spins his music around his environment and poverty. His breakout single, ‘Meri Gully Mein’, along with fellow rapper Naezy caught Bollywood’s attention. The Hindi film ‘Gully Boy’ is inspired by their lives and gr

The role model for an IAS officer

Anil Swarup, an IAS officer of Uttar Pradesh cadre who retired in 2018, is a model bureaucrat who retained his optimism right till the end of service and exemplified dedication and commitment. His excitement at the opportunities that a job in the IAS provided is evident on every page of his new book publis

Reform of the civil services: At home and away

The question of reform of the civil services has been debated extensively at all levels at least over the last five to six decades after independence. Indeed, it was soon perceived that the Indian Administrative Service (IAS) may not be well equipped to deal with the problems of an emerging developing coun

The greatest challenge for any government

Shouting vengeance at all and sundry while wriggling out of holes of our own making seems to be our very special national characteristic. Some recent instances are illustrative of this attribute. A number of business tycoons with thousands of crores of unresolved debts have fled abroad with the government

The mysterious case of CBI’s legality

The Central Bureau of Investigation (CBI) came into existence, based on a Resolution of the home ministry, dated April 1, 1963 – a sheer coincidence that it also happens to be April Fool’s day. Over the past few months, we have seen the CBI live up to its founding day with great zeal, being i

The Evolution of Modi

Gujarat was passing through a turbulent phase in the 1980s. The decade began middle class agitations against new reservation policies, and the caste friction turned communal under the watch of chief minister Madhavsinh Solanki, alienating majority of urban population on both counts. The ground was ripe for

Current Issue

Current Issue

Video

CM Nitish’s convoy attacked in Buxar

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter