Amid the ongoing economic woes created by the coronavirus pandemic, the Reserve Bank has decided to extend by six months the enhanced borrowing facility provided to banks to meet liquidity shortage till March 31, 2021.
The RBI, as a temporary measure, had increased the borrowing limit for scheduled banks under the marginal standing facility scheme from 2% to 3% of their Net Demand and Time Liabilities with effect from March 27, 2020.
The facility, which was initially available up to June 30, 2020 was later extended up to September 30, 2020 in view of the disruptions caused by the Covid-19 pandemic.
"With a view to providing comfort to banks on their liquidity requirements as also to enable to continue to meet LCR requirements, it has been decided to continue with the MSF relaxation for a further period of six months, i.e., up to March 31, 2021," RBI said in a statement.
This dispensation, it added, provides increased access to funds to the extent of Rs 1.49 lakh crore, and also qualifies as High-Quality Liquid Assets for the Liquidity Coverage ratio.
Under the MSF, banks can borrow overnight at their discretion by dipping into the Statutory Liquidity Ratio.
The marginal standing facility rate currently stands at 4.25%.
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