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      Question

      MSF Rate is usually _____ than the Repo

      Rate.
      A Higher Correct Answer Incorrect Answer
      B Lower Correct Answer Incorrect Answer
      C Same Correct Answer Incorrect Answer
      D Depends on the macroeconomic situation Correct Answer Incorrect Answer
      E No relation Correct Answer Incorrect Answer

      Solution

      Marginal standing facility (MSF) is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely. Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under liquidity adjustment facility or LAF in short.

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