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    Question

    Identify the correct statement about marginal standing facility.

    A Penal rate to administer good governance in banks Correct Answer Incorrect Answer
    B Penal rate for overnight borrowing from RBI Correct Answer Incorrect Answer
    C Interest rate at which banks borrow from RBI Correct Answer Incorrect Answer
    D Interest rate commonly used in money market Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    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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