Economics • Banking & FinanceHard
What specific operational mechanism does the Marginal Standing Facility provide to scheduled commercial banks in India?
A. An emergency window allowing banks to borrow overnight funds from the Reserve Bank of India against excess government securities exceeding their statutory liquidity ratio requirements✓ Correct Answer
B. A long-term refinancing facility for agricultural lending at subsidized interest rates
C. A specialized settlement platform for large-value foreign currency derivatives
D. An automated mechanism for transferring unclaimed deposits to the Depositor Education and Awareness Fund
💡 Solution & Explanation
The Marginal Standing Facility permits scheduled commercial banks to tap overnight emergency funds from the Reserve Bank of India up to a specified percentage of their net demand and time liabilities by dipping into their statutory liquidity ratio portfolio. Long-term agricultural refinance is administered through specialized institutions like NABARD. Foreign currency derivatives are cleared through dedicated clearing corporations. Unclaimed deposits are managed under separate regulatory provisions.
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