Economics • Banking & FinanceMedium
Which of the following best describes 'Marginal Standing Facility (MSF)' in the Indian banking system?
A. A window through which scheduled commercial banks can borrow overnight funds from the RBI in emergency situations by dipping into their SLR quota.✓ Correct Answer
B. The rate at which the central bank purchases government securities from primary dealers.
C. The minimum interest rate below which banks cannot lend to general retail borrowers.
D. A long-term refinancing facility provided exclusively for agricultural infrastructure projects.
💡 Solution & Explanation
The Marginal Standing Facility permits scheduled commercial banks to procure emergency overnight liquidity directly from the central bank by dipping into statutory liquidity ratios. Repo rate operations differ by catering to regular liquidity adjustments rather than emergency shortfalls.
More Economics Banking & Finance questions
- What is the operational mandate and scope of 'Small Finance Banks' in the Indian financial architecture?
- What does 'Repo Rate' signify in the monetary operations of the Reserve Bank of India?
- What is the primary role of the 'Deposit Insurance and Credit Guarantee Corporation (DICGC)' in India?
- Which specialized financial institution acts as the apex agency for meeting the credit needs of micro, small,…
- Which of the following entities is authorized to issue 'Commercial Paper (CP)' in the Indian money market?