QUESTION

Easy

Economy

Prelims 2014

The terms ‘Marginal Standing Facility Rate’ and ‘Net Demand and Time Liabilities’, sometimes appearing in the news, are used in relation to

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Explanation

The terms 'Marginal Standing Facility Rate' and 'Net Demand and Time Liabilities' are used in relation to banking operations, specifically related to short-term liquidity management by banks with the Reserve Bank of India (RBI).

Marginal Standing Facility (MSF) This is a facility offered by the RBI to banks as a last resort to borrow short-term overnight funds. It allows banks to meet their temporary liquidity shortfalls.

Net Demand and Time Liabilities (NDTL) This refers to the total amount of a bank's deposits that are repayable on demand (current and savings accounts) or after a specific period (fixed deposits).

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