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Consider the following statements regarding the Marginal Standing Facility (MSF) Rate:
1. It is a rate at which banks can borrow from the Reserve Bank of India in a situation of liquidity shortfall.
2. MSF is available for commercial banks as well as co-operative banks.
3. MSF rate is Lower than Liquidity Adjustment Facility (LAF).
Which of the above statements is/are correct?
1. It is a rate at which banks can borrow from the Reserve Bank of India in a situation of liquidity shortfall.
2. MSF is available for commercial banks as well as co-operative banks.
3. MSF rate is Lower than Liquidity Adjustment Facility (LAF).
Which of the above statements is/are correct?
- a)1 only
- b)3 only
- c)1 and 2 only
- d)1, 2 and 3
Correct answer is option 'A'. Can you explain this answer?
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Verified Answer
Consider the following statements regarding the Marginal Standing Faci...
• Statement 2 is incorrect: The Marginal Standing Facility (MSF) rate are available only for commercial banks.
• Statement 3 is incorrect: MSF rate is always above the repo rate.
Marginal Standing Facility (MSF)
• The Reserve Bank of India in its monetary policy for 2011-12, introduced the MSF, under which banks could borrow funds from RBI at a rate higher than the liquidity adjustment facilityrepo rate against pledging government securities.
• Co-operative banks cannot avail the facilities under MSF.
• The MSF rate is pegged 100 basis points or a percentage point above the repo rate. Banks can borrow funds through MSF when there is a considerable shortfall of liquidity.
• This measure has been introduced by RBI to regulate short-term asset-liability mismatches more effectively.
• Reducing the rate of MSF strengthens liquidity enhancement measures aimed at increasing bank access to lower-cost funds.
• Recently, on the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) decided to:
1. Reduce the policy repo rate under the liquidity adjustment facility (LAF) by 35 basis points (bps) from 5.75 percent to 5.40 percent with immediate effect.
2. Consequently, the reverse repo rate under the LAF stands revised to 5.15 percent, and the marginal standing facility (MSF) rate and the Bank Rate to 5.65 percent.
3. The MPC also decided to maintain the accommodative stance of monetary policy.
• Statement 3 is incorrect: MSF rate is always above the repo rate.
Marginal Standing Facility (MSF)
• The Reserve Bank of India in its monetary policy for 2011-12, introduced the MSF, under which banks could borrow funds from RBI at a rate higher than the liquidity adjustment facilityrepo rate against pledging government securities.
• Co-operative banks cannot avail the facilities under MSF.
• The MSF rate is pegged 100 basis points or a percentage point above the repo rate. Banks can borrow funds through MSF when there is a considerable shortfall of liquidity.
• This measure has been introduced by RBI to regulate short-term asset-liability mismatches more effectively.
• Reducing the rate of MSF strengthens liquidity enhancement measures aimed at increasing bank access to lower-cost funds.
• Recently, on the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) decided to:
1. Reduce the policy repo rate under the liquidity adjustment facility (LAF) by 35 basis points (bps) from 5.75 percent to 5.40 percent with immediate effect.
2. Consequently, the reverse repo rate under the LAF stands revised to 5.15 percent, and the marginal standing facility (MSF) rate and the Bank Rate to 5.65 percent.
3. The MPC also decided to maintain the accommodative stance of monetary policy.
Most Upvoted Answer
Consider the following statements regarding the Marginal Standing Faci...
Marginal Standing Facility (MSF) Rate
• The Marginal Standing Facility (MSF) Rate is a rate at which banks can borrow overnight funds from the Reserve Bank of India (RBI) in a situation of liquidity shortfall.
• The MSF is available only for scheduled commercial banks and not for co-operative banks.
• The MSF rate is higher than the Liquidity Adjustment Facility (LAF) rate.
Therefore, statement 1 is correct, statement 2 is incorrect, and statement 3 is incorrect. Hence, the correct answer is option 'A'.
• The Marginal Standing Facility (MSF) Rate is a rate at which banks can borrow overnight funds from the Reserve Bank of India (RBI) in a situation of liquidity shortfall.
• The MSF is available only for scheduled commercial banks and not for co-operative banks.
• The MSF rate is higher than the Liquidity Adjustment Facility (LAF) rate.
Therefore, statement 1 is correct, statement 2 is incorrect, and statement 3 is incorrect. Hence, the correct answer is option 'A'.
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Consider the following statements regarding the Marginal Standing Facility (MSF) Rate:1. It is a rate at which banks can borrow from the Reserve Bank of India in a situation of liquidity shortfall.2. MSF is available for commercial banks as well as co-operative banks.3. MSF rate is Lower than Liquidity Adjustment Facility (LAF).Which of the above statements is/are correct?a)1 onlyb)3 onlyc)1 and 2 onlyd)1, 2 and 3Correct answer is option 'A'. Can you explain this answer?
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Consider the following statements regarding the Marginal Standing Facility (MSF) Rate:1. It is a rate at which banks can borrow from the Reserve Bank of India in a situation of liquidity shortfall.2. MSF is available for commercial banks as well as co-operative banks.3. MSF rate is Lower than Liquidity Adjustment Facility (LAF).Which of the above statements is/are correct?a)1 onlyb)3 onlyc)1 and 2 onlyd)1, 2 and 3Correct answer is option 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding the Marginal Standing Facility (MSF) Rate:1. It is a rate at which banks can borrow from the Reserve Bank of India in a situation of liquidity shortfall.2. MSF is available for commercial banks as well as co-operative banks.3. MSF rate is Lower than Liquidity Adjustment Facility (LAF).Which of the above statements is/are correct?a)1 onlyb)3 onlyc)1 and 2 onlyd)1, 2 and 3Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding the Marginal Standing Facility (MSF) Rate:1. It is a rate at which banks can borrow from the Reserve Bank of India in a situation of liquidity shortfall.2. MSF is available for commercial banks as well as co-operative banks.3. MSF rate is Lower than Liquidity Adjustment Facility (LAF).Which of the above statements is/are correct?a)1 onlyb)3 onlyc)1 and 2 onlyd)1, 2 and 3Correct answer is option 'A'. Can you explain this answer?.
Consider the following statements regarding the Marginal Standing Facility (MSF) Rate:1. It is a rate at which banks can borrow from the Reserve Bank of India in a situation of liquidity shortfall.2. MSF is available for commercial banks as well as co-operative banks.3. MSF rate is Lower than Liquidity Adjustment Facility (LAF).Which of the above statements is/are correct?a)1 onlyb)3 onlyc)1 and 2 onlyd)1, 2 and 3Correct answer is option 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding the Marginal Standing Facility (MSF) Rate:1. It is a rate at which banks can borrow from the Reserve Bank of India in a situation of liquidity shortfall.2. MSF is available for commercial banks as well as co-operative banks.3. MSF rate is Lower than Liquidity Adjustment Facility (LAF).Which of the above statements is/are correct?a)1 onlyb)3 onlyc)1 and 2 onlyd)1, 2 and 3Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding the Marginal Standing Facility (MSF) Rate:1. It is a rate at which banks can borrow from the Reserve Bank of India in a situation of liquidity shortfall.2. MSF is available for commercial banks as well as co-operative banks.3. MSF rate is Lower than Liquidity Adjustment Facility (LAF).Which of the above statements is/are correct?a)1 onlyb)3 onlyc)1 and 2 onlyd)1, 2 and 3Correct answer is option 'A'. Can you explain this answer?.
Solutions for Consider the following statements regarding the Marginal Standing Facility (MSF) Rate:1. It is a rate at which banks can borrow from the Reserve Bank of India in a situation of liquidity shortfall.2. MSF is available for commercial banks as well as co-operative banks.3. MSF rate is Lower than Liquidity Adjustment Facility (LAF).Which of the above statements is/are correct?a)1 onlyb)3 onlyc)1 and 2 onlyd)1, 2 and 3Correct answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for UPSC.
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