MUMBAI, March 19 (Reuters) - The Reserve Bank of India on Tuesday eased banks' margin requirements for borrowing under its repo window, in a bid to help the lenders tide over the cash crunch.
Under the central bank's Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF), banks will be able to pledge their federal government bonds and treasury bills with a margin requirement of 4 percent from the current norm of 5 percent, the RBI said.
For state development loans, the margin requirement will drop to 6 percent from 10 percent, it said.
The changes will be effective from April 2, the RBI said.
The banking system is facing acute liquidity shortage with banks borrowing over a trillion rupees on an average over the last one week. (Reporting by Neha Dasgupta; Editing by Subhranshu Sahu)