Economics • Banking & FinanceEasy
What does 'Marginal Standing Facility (MSF)' allow scheduled commercial banks to do?
A. Borrow overnight funds from the RBI in emergency situations by dipping into their Statutory Liquidity Ratio (SLR) portfolio✓ Correct Answer
B. Borrow long-term capital from international markets without RBI approval
C. Provide zero-interest loans to agricultural sectors under government mandate
D. Maintain foreign exchange reserves directly with the World Bank
💡 Solution & Explanation
The Marginal Standing Facility permits scheduled commercial banks to borrow overnight funds from the Reserve Bank of India in emergency situations by dipping into their Statutory Liquidity Ratio portfolio beyond normal limits. It acts as a safety valve against sudden liquidity crunches at a rate higher than the repo rate.
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