The Reserve Bank of India's Deputy Governor KC Chakrabarty said on Monday banks may use the newly introduced marginal standing facility (MSF) in mid-June when liquidity is expected to tighten sharply owing to advance tax payments.
"Every quarter it happens. I don't think there is anything different in it. New type of liquidity management facility has been launched. So it will be tested. There can be problem at any time. The system has to adjust itself," Chakrabarty said. He was speaking on the sidelines of event on new financial reporting and risk management.
The Reserve Bank of India introduced MSF at it annual policy statement, saying that banks can dip below 1% of their statutory liquidity ratio to avail cash from this window. This facility will be available to banks at 100 basis points over the repo rate.
