CHEAP LIQUIDIT ON ITS WAY OUT

The Reserve Bank said it will discontinue special liquidity window from tomorrow and replace it with marginal standing facility ( MSF). " In the light of modified operating procedure of monetary policy introduced from May 3 and introduction of the marginal standing facility ( MSF), it has been decided to discontinue the second liquidity adjustment facility ( SLAF) on reporting Friday effective May 20, 2011," RBI said. Under the MSF facility, a bank can borrow up to 1 % of its total deposits from RBI to tide over liquidity problem. However, interest rate under the facility would be 100 basis points higher than the short- term lending ( repo) rate. The repo rate, which was increased this month by 50 basis points, stands at 7.25 %. As such, the rate charged under the MSF would be 8.25 %.