Question

To contain the volatility in the overnight inter-banks rate, Marginal Standing Facility (MS

Q: Answer-To contain the volatility in the overnight inter-banks rate, Marginal Standing Facility (MSF) was in...

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 LAF. The MSF rate is pegged 100 basis points or a percentage point above the repo rate. Under MSF, banks can borrow funds up to one percentage of their net demand and time liabilities NDTL.