Under the MSF, a bank can borrow from the RBI overnight by pledging government securities, even dipping into the bonds it holds for its statutory liquidity requirement, up to a limit. Because the MSF rate is set above the repo rate, it acts as the ceiling of the policy corridor and is used mainly when cash is tight.
Finance glossary
What is Marginal Standing Facility (MSF)?
An emergency RBI window where banks can borrow overnight at a rate above the repo rate when they run short of funds.