Good news for banks from RBI in view of Covid-19 pandemic - Check Reserve Bank circular details

In view of the ongoing economic woes created by Covid-19 pandemic, the Reserve Bank has decided to extend the enhanced borrowing facility provided to the banks to meet their liquidity shortages till September 30. The RBI, as a temporary measure, had increased the borrowing limit of scheduled banks under the marginal standing facility (MSF) scheme from 2 per cent to 3 per cent of their Net Demand and Time Liabilities (NDTL) with effect from March 27, 2020.

Marginal standing facility (MSF)

Under the MSF, banks can borrow overnight funds at their discretion by dipping into the Statutory Liquidity Ratio (SLR).

This relaxation, which was granted till June 30, 2020, has now been extended till September 30.

"On a review, it has now been decided to extend this enhanced limit till September 30, 2020," the Reserve Bank of India (RBI) said in a circular. Banks may continue to access overnight funds under the MSF against their excess SLR holding, the circular added.

The marginal standing facility rate currently stands at 4.25 per cent.

The RBI has also extended the relaxation on the minimum daily maintenance of the Cash Reserve Ratio (CRR) at 80 per cent for a further period of three months till September 25, 2020.

On March 27, the minimum daily maintenance of the CRR was reduced from 90 per cent of the prescribed CRR to 80 per cent till June 26, 2020.

This was done in view of the continuing hardships faced by banks in terms of social distancing of staff and consequent strains on reporting requirements.

Meanwhile, RBI has notified Floating Rate Savings Bonds 2020 (Taxable). RBI in a notification said, "Government of India has decided to launch Floating Rate Savings Bonds 2020 (Taxable) scheme, with effect from July 01, 2020 in terms of GoI Notification F.No.4(10)-B(W&M)/2020 dated June 26, 2020. The terms and conditions of the issuance of the Bonds shall be as per the above GOI Notification. A copy of the Circular, Government Notification and Press Release with regard to this Scheme has been placed on RBI website."