Question

Which of the following is/are the difference between Repo and MSF?

I- MSF is used only in emergencies.

II- MSF Rate is usually higher than Repo Rate.

III- Banks can pledge government securities from the SLR quota up to 1% under the MSF.

A Only I Correct Answer Incorrect Answer
B Only II Correct Answer Incorrect Answer
C I & II Correct Answer Incorrect Answer
D II & III Correct Answer Incorrect Answer
E All of the above Correct Answer Incorrect Answer

Solution

The difference between the MSF and the repo rate is that MSF is used only in emergencies. Another difference with the repo rate is that banks can pledge government securities from the SLR quota up to 1% under the MSF. Then, even if the SLR comes below 21.5%, banks need not pay any penalty under MSF.

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