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Banking Awareness is considered to be the high scoring section in any competitive exam. It includes two main portions, current affairs GK and static GK. In this article, we will discuss some really important Banking Awareness topics that are covered in almost all competitive exams. Also, you can download the PDF of lists of different Banking Awareness topics.
In Banking Section, the questions are asked from following topics: History of Banking, banking terms, Marketing of Banking Products, Functions of Banks, Banks and their taglines, schemes, committees related to banking, headquarters of bank, some Banking news related, apps launched by banks, new schemes etc.
In a series of sharing useful study material for upcoming banking exams. Here, we are providing Banking Awareness notes for all banking Exams (IBPS, SBI & Other Banking Exams).
Marginal Standing Facility : Banking Awareness Study Notes
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.
MSF came into effect from 9th May 2011.
Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under liquidity adjustment facility or LAF in short. The MSF rate is pegged 100 basis points or a percentage point above the repo rate. Under MSF, banks can borrow funds up to one percentage of their net demand and time liabilities (NDTL).
MSF, being a penal rate, is always fixed above the repo rate. The MSF would be the last resort for banks once they exhaust all borrowing options including the liquidity adjustment facility by pledging government securities, where the rates are lower in comparison with the MSF. The MSF would be a penal rate for banks and the banks can borrow funds by pledging government securities within the limits of the statutory liquidity ratio. 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.
MSF represents the upper band of the interest corridor with repo rate at the middle and reverse repo as the lower band.
Main features of the MSF
- Eligibility: All Scheduled Commercial Banks having Current Account and SGL Account with Reserve Bank, Mumbai will be eligible to participate in the MSF Scheme.
- Tenor and Amount: Under the facility, the eligible entities can avail overnight, up to one percent of their respective Net Demand and Time Liabilities (NDTL) outstanding at the end of the second preceding fortnight.
- Timing: The Facility will be available on all working days in Mumbai, excluding Saturdays.
- Rate of Interest: The rate of interest on amount availed under this facility will be 100 basis points above the LAF repo rate, or as decided by the Reserve Bank from time to time.
- 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.
- 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 a sealed cover in the box provided in the Mumbai Office.
- Minimum request size: Requests will be received for a minimum amount of Rs. one crore and in multiples of Rs. one crore thereafter.
- Eligible Securities: MSF will be undertaken in all SLReligible transferable Government of India (GoI) dated Securities/Treasury Bills and State Development Loans (SDL).
