What do you understand by Marginal Standing Facility ........

Current GK (RBI Grade B) Money Supply and Monetary Policy

What do you understand by Marginal Standing Facility?

Rate of interest which is levied on Short-Term loans taken by commercial banks from RBI.

Rate at which commercial banks charge on their surplus funds with RBI.

The amount a commercial bank needs to maintain in the form of cash, or gold or government approved securities (Bonds) before providing credit to its customers.

It is defined in Sec 49 of RBI Act 1934 as the ‘standard rate at which RBI is prepared to buy or rediscount bills of exchange or other commercial papers eligible for purchase under this act’.

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.

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Explanation:

Marginal Standing Facility is a new Liquidity Adjustment Facility (LAF) window created by Reserve Bank of India in its credit policy of May 2011. MSF is the rate at which the banks are able to borrow overnight funds from RBI against the approved government securities