Identify the correct statement about marginal standing facility.

Q: Answer-&lt;p&gt;&amp;nbsp;Identify the correct statement about marginal standing facility.&lt;/p&gt;

Marginal Standing Facility MSF It is a facility under which scheduled commercial banks can borrow additional amount of overnight money from the Reserve Bank by dipping into their Statutory Liquidity Ratio SLR portfolio up to a limit at a penal rate of interest. This provides a safety valve against unanticipated liquidity shocks to the banking system.

A Penal rate to administer good governance in banks Correct Incorrect

B Penal rate for overnight borrowing from RBI Correct Incorrect

C Interest rate at which banks borrow from RBI Correct Incorrect

D Interest rate commonly used in money market Correct Incorrect

E None of the above Correct Incorrect

Detailed Solution

Marginal Standing Facility (MSF): It is a facility under which scheduled commercial banks can borrow additional amount of overnight money from the Reserve Bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of interest. This provides a safety valve against unanticipated liquidity shocks to the banking system.

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Identify the correct statement about marginal standing facility.

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