Quick Fix Summary
Scheduled commercial banks with valid Current and SGL accounts at the RBI can borrow up to 3% of their NDTL (as of 2026). MSF is priced at repo rate + 100 basis points and is meant for emergencies only.
MSF is an emergency borrowing facility offered by the RBI to scheduled commercial banks, allowing them to borrow up to 3% of their Net Demand and Time Liabilities at a rate of repo + 100 basis points.
MSF is essentially the RBI’s penalty-rate emergency lifeline for scheduled commercial banks.
MSF is essentially the RBI’s penalty-rate emergency lifeline for scheduled commercial banks.
MSF is essentially the RBI’s penalty-rate emergency lifeline for scheduled commercial banks.1 Picture it like the banking world’s 911 call—only break it out when every other option’s exhausted. Unlike the repo window, MSF comes with a premium (usually repo + 100 bps) to discourage routine use. As of 2026, it remains India’s go-to safety net when interbank markets seize up.
MSF mechanics are simple once you strip away the jargon.
MSF mechanics are simple once you strip away the jargon.
MSF mechanics are simple once you strip away the jargon. First, confirm your bank’s got the right RBI accounts—Current and SGL. Next, grab your last NDTL figure; you can borrow up to 3% of that. Then set the rate (repo + ~1%), book the cash, and track interest until payback. Sounds easy, but the higher cost makes this a last-resort move.
Only scheduled commercial banks with Current and SGL accounts at the RBI qualify for MSF.
Only scheduled commercial banks with Current and SGL accounts at the RBI qualify for MSF.
Only scheduled commercial banks with Current and SGL accounts at the RBI qualify for MSF.2 They also must stay within the 3%-of-NDTL cap. Regional rural banks, co-op banks, or fintech players need not apply—this is strictly for the big regulated players with direct RBI access.
Multiply your NDTL by 3% to find your borrowing ceiling.
Multiply your NDTL by 3% to find your borrowing ceiling.
Multiply your NDTL by 3% to find your borrowing ceiling. Say NDTL is ₹10,000 crore—your max MSF draw is ₹300 crore. Exceed that? Not possible. The limit resets each reporting period, so watch your NDTL trends closely.
MSF appears as short-term borrowings on the liability side and interest expense on the income statement.
MSF appears as short-term borrowings on the liability side and interest expense on the income statement.
MSF appears as short-term borrowings on the liability side and interest expense on the income statement.3 The borrowed cash lands in Cash/Bank A/c, while the offsetting entry is Borrowings (MSF Liability). Interest accrues over time and hits Interest Expense monthly or quarterly—no surprises there.
When you first borrow, debit Cash/Bank ₹300 crore and credit Borrowings (MSF Liability) ₹300 crore.
When you first borrow, debit Cash/Bank ₹300 crore and credit Borrowings (MSF Liability) ₹300 crore.
When you first borrow, debit Cash/Bank ₹300 crore and credit Borrowings (MSF Liability) ₹300 crore. That’s the clean entry when funds hit your account. Later, slice the interest into smaller accruals and post them to Interest Expense and Accrued Interest Payable.
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash/Bank A/c | 300,000,000 | |
| Borrowings (MSF Liability) | 300,000,000 |
Calculate interest using the MSF rate and days outstanding.
Calculate interest using the MSF rate and days outstanding.
Calculate interest using the MSF rate and days outstanding. Borrowed ₹300 crore at 7.25% for 30 days? That’s roughly ₹1.78 crore in interest. Post the debit to Interest Expense and the credit to Accrued Interest Payable. Repeat this every reporting period until the loan’s repaid.
MSF borrowings are short-term liabilities under ICAI AS 1, with interest recognized on an accrual basis per IFRS 9.
MSF borrowings are short-term liabilities under ICAI AS 1, with interest recognized on an accrual basis per IFRS 9.
MSF borrowings are short-term liabilities under ICAI AS 1, with interest recognized on an accrual basis per IFRS 9.4 That means you classify the liability separately and match interest charges to the periods you benefit from the funds—not when you pay the cash.
Try the repo window first—it’s cheaper but needs collateral.
Try the repo window first—it’s cheaper but needs collateral.
Try the repo window first—it’s cheaper but needs collateral. If that’s tapped out, the Liquidity Adjustment Facility (LAF) offers daily auctions through repo and reverse repo. Or dip into SLR holdings (up to 3%), though that eats into your high-quality liquid asset buffer. Each fix has trade-offs; pick the one that fits your liquidity crunch.
The best defense is a strong offense: maintain healthy liquidity buffers and diversify funding sources.
The best defense is a strong offense: maintain healthy liquidity buffers and diversify funding sources.
The best defense is a strong offense: maintain healthy liquidity buffers and diversify funding sources.5 Run monthly NDTL forecasts, stick to RBI’s Liquidity Coverage Ratio (LCR), and match asset-liability maturities with term deposits and CDs. Aim to use MSF for less than 1% of NDTL—anything more and regulators start asking tough questions.
Review the RBI Master Circular on LAF annually and have internal audit check MSF draws quarterly.
Review the RBI Master Circular on LAF annually and have internal audit check MSF draws quarterly.
Review the RBI Master Circular on LAF annually and have internal audit check MSF draws quarterly.6 That keeps you aligned with the latest rules and proves you’re not abusing the facility. Honestly, this is the boring but necessary paperwork that saves you from penalties later.
MSF is the costliest and most restrictive option—use it only when nothing else works.
MSF is the costliest and most restrictive option—use it only when nothing else works.
MSF is the costliest and most restrictive option—use it only when nothing else works.7 The repo window is cheaper but needs collateral. LAF offers daily flexibility but lacks MSF’s overnight certainty. SLR drawdowns are temporary and reduce your liquid-asset cushion. Each tool has its moment; MSF is the nuclear option.
Check the RBI website under Monetary Policy or LAF sections—rates update after every policy review.
Check the RBI website under Monetary Policy or LAF sections—rates update after every policy review.
Check the RBI website under Monetary Policy or LAF sections—rates update after every policy review.8 The 3%-of-NDTL limit is also published in the Master Circular, so you can cross-check before you borrow. Don’t rely on old emails; the RBI changes these numbers without warning.
RBI Master Direction on Liquidity Coverage Ratio
The Institute of Chartered Accountants of India
Is MSF a part of LAF?
The Reserve Bank of India (RBI) today allowed regional rural banks (RRBs) to access the liquidity adjustment facility (LAF), marginal standing facility (MSF) and call or notice money market, aimed at facilitating better liquidity management for these lenders.
What does MSF mean?
Definition: Marginal standing facility (MSF) is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely. Under MSF, banks can borrow funds up to one percentage of their net demand and time liabilities (NDTL).
What is marginal standing facility rate?
MSF rate or Marginal Standing Facility rate is the interest rate at which the Reserve Bank of India provides money to scheduled commercial banks facing acute shortage of liquidity. This rate differs from the Repo rate, and banks can get overnight funds from RBI by paying the exclusive MSF rate.
What is difference between MSF and repo rate?
Key Differences between Repo Rate and MSF
Both repo rate and MSF are rates at which RBI lends money to banks. ... While, the MSF is meant for lending overnight to banks. Repo rate is the rate at which money is lent by RBI to commercial banks, while MSF is a rate at which RBI lends money to scheduled banks.
Who are eligible for MSF?
Features of MSF
1. Eligibility: All Scheduled Commercial Banks having Current Account and SGL Account with Reserve Bank will be eligible to participate in the MSF Scheme.
What LAF means?
What Is a Liquidity Adjustment Facility? A liquidity adjustment facility (LAF) is a tool used in monetary policy, primarily by the Reserve Bank of India (RBI) that allows banks to borrow money through repurchase agreements (repos) or to make loans to the RBI through reverse repo agreements.
Which banks are eligible for LAF?
All Scheduled Commercial Banks (excluding Regional Rural Banks) and Primary Dealers (PDs) having Current Account and SGL Account with Reserve Bank, Mumbai will be eligible to participate in the Repo and Reverse Repo auctions.
What is CRR and SLR?
CRR is the percentage of money which a bank has to keep with RBI in the form of cash. On the other hand, SLR is the proportion of liquid assets to time and demand liabilities. ... CRR regulates the flow of money in the economy whereas SLR ensures the solvency of the banks.
Why MSF is a penal rate?
MSF, being a penal rate, is always fixed above the repo rate. ... The scheme has been introduced by RBI with the main aim of reducing volatility in the overnight lending rates in the inter-bank market and to enable smooth monetary transmission in the financial system.
What is full form SLR?
Statutory Liquidity Ratio or SLR is a minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities. ... These are not reserved with the Reserve Bank of India (RBI), but with banks themselves. The SLR is fixed by the RBI.
What is MSF and SLR?
On March 27, 2020 banks were allowed to avail of funds under the marginal standing facility (MSF) by dipping into the Statutory Liquidity Ratio (SLR) by up to an additional one per cent of net demand and time liabilities (NDTL), i.e., cumulatively up to 3 per cent of NDTL.
What is the time period of repo rate?
Term Repo: Term Repo includes a period of more than one day. The usual duration of term repo or variable rate term repo is 7 days, 14 days and 28 days. The RBI normally announces the term repo auction as and when there is a need of funds by the banks for a duration of more than a day.
What is overnight liquidity?
Overnight rates are a measure of the liquidity prevailing in the economy. In tight liquidity conditions, overnight rates shoot up. Overnight rates may also shoot up due to lack of confidence amongst banks, as was observed in the liquidity crunch of 2008.
What is CRR full form?
Cash Reserve Ratio (CRR) is the share of a bank’s total deposit that is mandated by the Reserve Bank of India (RBI) to be maintained with the latter as reserves in the form of liquid cash.
How much can I borrow MSF?
On March 27, the central bank had increased the borrowing limit for scheduled banks under the marginal standing facility (MSF) scheme from 2 per cent to 3 per cent of their net demand and time liabilities.
