Economics • Banking & FinanceHard
Which of the following best describes the 'Marginal Standing Facility (MSF)' window operated by the Reserve Bank of India?
A. A penal window through which scheduled commercial banks can borrow overnight funds from the RBI against government securities in excess of their SLR portfolio limits.✓ Correct Answer
B. A long-term lending facility provided exclusively to cooperative banks for agricultural infrastructure development.
C. A specialized foreign exchange swap mechanism used to manage seasonal volatility in rupee liquidity.
D. An interbank electronic transfer platform created to settle high-value retail transactions instantly.
💡 Solution & Explanation
The Marginal Standing Facility functions as a penal window allowing commercial banks to secure overnight funds from the central bank by pledging government securities beyond statutory liquidity limits. Long-term cooperative bank lending or foreign exchange swap mechanisms operate under entirely different regulatory windows within the monetary framework. Banking awareness modules frequently examine central bank liquidity management tools.
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