What is the significance of the Marginal Standing Facility (MSF) in the RBI's mo

What is the significance of the Marginal Standing Facility (MSF) in the RBI's monetary policy?

What is the significance of the Marginal Standing Facility (MSF) in the RBI's monetary policy?

Step 1: Understand what the Marginal Standing Facility (MSF) is. It is a tool used by the Reserve Bank of India (RBI) that allows banks to borrow money overnight.
Step 2: Know that banks can borrow this money at a higher interest rate compared to other borrowing options.
Step 3: Recognize the purpose of MSF. It acts as a safety measure for banks when they face a shortage of cash (liquidity).
Step 4: Realize that by using MSF, banks can ensure they have enough funds to meet their daily needs and obligations.
Step 5: Understand that MSF is part of the RBI's monetary policy, which helps maintain stability in the banking system.

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