Consider the following statements regarding marginal standing facility rate: 1. It was come into effect in May 2011. 2. Under this scheme, banks can borrow overnight up to 1 per cent of their net demand and time liabilities (NDTL) from the RBI. Which of the statements given above is/are correct? |ForumIAS

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C

Notes:

Explanation: MSF is a new scheme announced by the RBI in its Monetary Policy, 2011–12 which came into effect in May 2011.

Under this scheme, banks can borrow overnight up to 1 per cent of their net demand and time liabilities (NDTL) from the RBI, at the interest rate 1 per cent (100 basis points) higher than the current repo rate.
In an attempt to strengthen rupee and check its falling exchange rate, the RBI increased the gap between ‘repo’ and MSF to 3 per cent (late July 2013).

Source: FORUMIAS