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The
Marginal
Standing
Facility
Scheme
was
introduced
on the
lines of
the
existing
Liquidity
Adjustment
Facility
– Repo
Scheme (LAF
– Repo).
The
salient
features
of the
ORIGINAL Scheme
are as
under:
1.
Effective
Date
This
facility
will be
effective
from May
9, 2011.
2.
Eligibility
All
Scheduled
Commercial
Banks
having
Current
Account
and SGL
Account
with
Reserve
Bank,
Mumbai
will be
eligible
to
participate
in the
MSF
Scheme.
3. Tenor
and
Amount
Under
the
facility,
the
eligible
entities
can
avail
overnight,
up to
[one per
cent]* of
their
respective
Net
Demand
and Time
Liabilities
(NDTL)
outstanding
at the
end of
the
second
preceding
fortnight.
But for
the
intervening
holidays,
the MSF
facility
will be
for one
day
except
on
Fridays
when the
facility
will be
for
three
days or
more,
maturing
on the
following
working
day. In
the
event,
the
banks’
SLR
holdings
fall
below
the
statutory
requirement
up to
one per
cent of
their
NDTL,
banks
will not
have the
obligation
to seek
a
specific
waiver
for
default
in SLR
compliance
arising
out of
use of
this
facility
in terms
of
notification
issued
under
sub
section
(2A) of
Section
24 of
the
Banking
Regulation
Act,
1949.
*
WEF 17th
April
2012 :
RBI
announced
that in
in order
to
provide
greater
liquidity
cushion,
it has
been
decided
to raise
the
borrowing
limit of
SCBs
under
the MSF
from 1
per cent
to 2 per
cent of
their
NDTL
outstanding
at the
end of
the
second
preceding
fortnight
with
immediate
effect.
4.
Timing
The
Facility
will be
available
on all
working
days in
Mumbai,
excluding
Saturdays
between
3.30
P.M. and
4.30 P.M.
5. Rate
of
Interest
The rate
of
interest
on
amount
availed
under
this
facility
was
initially
fixed
[100
basis
points]**
above
the LAF
repo
rate, or
as
decided
by the
Reserve
Bank
from
time to
time.
**
The rate
of
interest
on
amount
availed
under
this
facility
was
increased
to
300
basis
points
above
the LAF
repo
rate,
wef
15/7/2013,
from 100
bps to
300 bps
above
repo
rate due
to
pressure
on
exchange
rate.]
[
However,
wef
20/09/2013,
the rate
of
interest
has been
reduced
to 9.50%
i.e. 200
bps
above
the repo
rate]
6.
Discretion
to
Reserve
Bank
The
Reserve
Bank
will
reserve
the
right to
accept
or
reject
partially
or
fully,
the
request
for
funds
under
this
facility.
7.
Mechanics
of
operations
i) The
requests
will be
submitted
electronically
in the
Negotiated
Dealing
System (NDS).
Eligible
members
facing
genuine
system
problem
on any
specific
day, may
submit
physical
requests
in
sealed
cover in
the box
provided
in the
Mumbai
Office,
Reserve
Bank of
India,
to the
Manager,
Reserve
Bank of
India,
Securities
Section,
Public
Accounts
Department
(PAD),
Mumbai
Office
by 4.30
P.M.
ii) The
NDS
provides
for
submission
of
single
or
multiple
applications
by the
member.
However,
as far
as
possible
only one
request
should
be
submitted
by an
applicant.
iii) The
MSF will
be
conducted
as
"Hold-in-Custody"
repo,
similar
to LAF -
Repo.
iv) On
acceptance
of MSF
requests,
the
applicant’s
RC SGL
Account
will be
debited
by the
required
quantum
of
securities
and
credited
to
Bank’s
RC SGL
Account.
Accordingly,
the
applicant’s
current
account
will be
credited
with the
MSF
application
amount.
The
transactions
will be
reversed
in the
second
leg. In
case the
second
leg
falls on
a
holiday,
the
reversal
date
will be
the next
working
day.
v) The
MSF
transactions
between
Reserve
Bank and
counter
parties
which
would
involve
operation
of the
RC SGL
Account
would
not
require
separate
SGL
forms.
vi)
Pricing
of all
securities
including
Treasury
Bills
will be
at face
value
for MSF
operations
by
Reserve
Bank.
Accrued
interest
as on
the date
of
transaction
will be
ignored
for the
purpose
of
pricing
of
securities.
8.
Minimum
request
size
Requests
will be
received
for a
minimum
amount
of
Rs. One
crore
and in
multiples
of Rs.
One
crore
thereafter.
9.
Eligible
Securities
MSF will
be
undertaken
in all
SLR-eligible
transferable
Government
of India
(GoI)
dated
Securities/Treasury
Bills
and
State
Development
Loans (SDL).
10.
Margin
Requirement
A margin
of five
per cent
will be
applied
in
respect
of GoI
dated
securities
and
Treasury
Bills.
In
respect
of SDLs,
a margin
of 10
per cent
will be
applied.
Thus,
the
amount
of
securities
offered
on
acceptance
of a
request
for
Rs.100
will be
Rs.105
(face
value)
of GoI
dated
securities
and
Treasury
Bills or
Rs.110
(face
value)
of SDLs.
11.
Settlement
of
Transactions
The
settlement
of all
applications
received
under
the MSF
Scheme
will
take
place on
the same
day
after
the
closure
of the
window
for
acceptance
of
applications.
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