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Under which rate does a bank borrow overnight money from the RBI beyond its repo limit?

  • A.MSF
  • B.Repo rate
  • C.Reverse repo
  • D.Bank rate

Answer: A

Correct answer: MSF

The Marginal Standing Facility lets a bank borrow overnight from the RBI beyond what the repo window allows, dipping into its statutory liquidity holdings, at a rate above the repo rate. It is the safety valve of the system: the MSF rate forms the ceiling of the interest rate corridor, with the reverse repo rate as its floor.

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