Multiple choice

Which of the following statements is/are true in respect of Marginal Standing Facility? A. MSF rate is the rate at which banks borrow funds overnight from the Reserve Bank of India (RBI) against approved government securities. B. The MSF came into effect from May 2011. C. Under the Marginal Standing Facility (MSF), currently banks avail funds from the RBI on overnight basis against their normal statutory liquidity ratio (SLR) holdings.

  1. Only A

  2. Only A and B

  3. Only A and C

  4. All three A, B and C are true
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Marginal Standing Facility (MSF) allows banks to borrow overnight funds from RBI against approved government securities, making statement A correct. It was indeed introduced in May 2011, making statement B correct. However, statement C is incorrect because MSF borrowing is available even after banks have exhausted their SLR holdings - it's a marginal facility above normal SLR requirements. Therefore, only A and B are correct.

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