Question
Download Solution PDFThe interest rate at which the Reserve Bank of India provides overnight liquidity to banks is called ______.
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is Marginal standing facility rate.
Key Points
- Marginal standing facility rate
- The penal rate at which banks can borrow, on an overnight basis, from the Reserve Bank by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a predefined limit (2 per cent).
- This provides a safety valve against unanticipated liquidity shocks to the banking system. The MSF rate is placed at 25 basis points above the policy repo rate.
Additional Information
- Reverse repo rate
- The rate at which a nation's central bank borrows money from its own domestic commercial banks is known as the Reverse Repo Rate. It is a tool for the RBI's monetary policy that can be used to manage a nation's money supply. Assuming all other factors stay constant, the money supply decreases when the reverse repo rate increases and vice versa.
- The amount of money accessible in the market will decrease if the Reverse Repo rate rises because commercial banks will be more enticed to deposit their funds with the RBI.
- Repo rate
- The interest rate at which the Reserve Bank provides liquidity under the liquidity adjustment facility (LAF) to all LAF participants against the collateral of government and other approved securities.
- Leverage rate
- A leverage ratio is any of a number of financial metrics that examine the amount of capital that comes from debt (loans) or evaluates a company's capacity to satisfy its financial obligations. Companies employ a combination of stock and debt to finance their operations, therefore the leverage ratio category is crucial.
- By understanding how much debt a firm has, you can assess its ability to pay off its loans when they become due.
Last updated on Jul 9, 2025
-> The SSC CGL Notification 2025 for the Combined Graduate Level Examination has been officially released on the SSC's new portal – www.ssc.gov.in.
-> Bihar Police Admit Card 2025 Out at csbc.bihar.gov.in
-> This year, the Staff Selection Commission (SSC) has announced approximately 14,582 vacancies for various Group B and C posts across government departments.
-> The SSC CGL Tier 1 exam is scheduled to take place from 13th to 30th August 2025.
-> Aspirants should visit ssc.gov.in 2025 regularly for updates and ensure timely submission of the CGL exam form.
-> Candidates can refer to the CGL syllabus for a better understanding of the exam structure and pattern.
-> The CGL Eligibility is a bachelor’s degree in any discipline.
-> Candidates selected through the SSC CGL exam will receive an attractive salary. Learn more about the SSC CGL Salary Structure.
-> Attempt SSC CGL Free English Mock Test and SSC CGL Current Affairs Mock Test.
-> The AP DSC Answer Key 2025 has been released on its official website.
-> The UP ECCE Educator 2025 Notification has been released for 8800 Posts.