The terms ‘Marginal Standing Facility Rate’ and ‘Net Demand and Time Liabilities’, sometimes appearing in news, are used in relation to:
✓ Correct answer: a) banking operations
ExplanationMarginal standing facility (MSF) is a window for banks to borrow from the Reserve Bank of India in an emer- gency situation when inter-bank liquidity dries up completely.Banks borrow from the central bank by pledging govern- ment securities at a rate higher than the repo rate under li- quidity adjustment facility( LAF) .The MSF rate is pegged 100 basis points or 1 percentage point above the repo rate.Under MSF banks can borrow funds up to one percentage of their net demand and time liabilities (NDTL).Demand Liabilities Demand Liabilities of a bank are liabilities which are pay- able on demand.These include current deposits, demand lia- bilities portion of savings bank deposits, margins held against letters of credit/guarantees, cash certificates and cumulative/ recurr-ing deposits, Demand Drafts (DDs), unclaimed deposits, credit balances in the Cash Credit account etc. Time Liabilities Time Liabilities of a bank are those which are payable oth- erwise than on demand.These include fixed deposits, cash certificates, cumulative and recurring deposits, time liabili- ties portion of
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