The RBI recently hiked the MSF for banks to drain liquidity and prevent the rupee from sliding.

Under the MSF banks were borrowing from the RBI at repo rate, plus 1 per cent, which effectively meant 8.25 per cent. But, with effect from July 17, banks are borrowing at 10.25 per cent.

In other significant move the RBI also fixed the limit for borrowing at 1% of the of the Net Demand and Time Liabilities (NDTL) of the banking system, reckoned as Rs.75,000 crore for this purpose. The allocation to individual banks will be made in proportion to their bids, subject to the overall ceiling. This change in LAF came into effect from July 17, 2013.

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