Under which rate banks borrow overnight money from RBI?

Q.  On which rate base, overnight money is needed by bank from RBI?
- Published on 15 Feb 17

a. MSF
b. Repo rate
c. Reverse repo
d. Bank rate

ANSWER: MSF
 
Marginal Standing Facility (MSF) rate refers to the rate at which the banks can borrow funds overnight from RBI against government securities.

MSF is a very short term borrowing scheme for scheduled commercial banks. Banks may borrow funds through MSF during severe cash shortage or acute shortage of liquidity.
  • The RBI had introduced the marginal standing facility (MSF) in its Monetary Policy (2011-12).
  • MSF came into effect on from May 9, 2011.
  • Banks used the facility for the first time in June 2011 and borrowed Rs.1 billion via the MSF.

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