RBI CUTS MSF RATE BY 0.5 % TO IMPROVE
LIQUIDITY
The
Reserve Bank of India (RBI) reduced the Marginal Standing Facility (MSF) rate
to 9 per cent from 9.5 per cent on Monday to improve liquidity in the system.
In a release issued from Mumbai on Monday the RBI said that the decision was
taken after a review of evolving liquidity conditions.
MSF allows banks to borrow money from the central bank at a higher rate when
there is a significant liquidity crunch. This is the second reduction in the
rate since the September 20 mid-quarter monetary policy review, when it was
lowered to 9.5 per cent from 10.25 per cent.
The RBI further said that it conducted open market purchase operations of Rs
9,974 crore on Monday with the aim of injecting liquidity into the system. The
central bank also said it will provide additional liquidity through term repos
of 7-day and 14-day tenor 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 every Friday, starting October 11.
As part of the measures
announced today by the Reserve Bank to improve liquidity conditions, the
marginal standing facility (MSF) rate has been reduced by 50 basis points from
9.5 per cent to 9.0 per cent with immediate effect.
Accordingly, the Bank
Rate also stands adjusted to 9.0 per cent with immediate effect.
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