Question 98 from UPSC CSE 2014 - Economy

Question

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

Accepted Answer

Correct Option: A. banking operations

Strategy: Identify the correct domain by focusing on the specific technical terms 'Marginal Standing Facility Rate' and 'Net Demand and Time Liabilities', which are exclusive to banking and monetary policy.

Key Info: ## Marginal Standing Facility (MSF) Rate
The MSF Rate is a monetary policy tool introduced by the Reserve Bank of India (RBI) in May 2011. It allows scheduled commercial banks to borrow overnight funds from the RBI by pledging government securities. The rate is typically higher than the repo rate, and borrowing is usually limited to 2% of a bank's Net Demand and Time Liabilities (NDTL).

## Net Demand and Time Liabilities (NDTL)
NDTL is the sum of a bank's demand and time liabilities (such as savings, fixed, and current deposits) with the public and other banks, minus any deposits held with other banks.

**Role in Monetary Policy**
Both MSF and NDTL are essential components of the RBI's liquidity management framework. They help banks manage short-term liquidity mismatches and ensure stability in the monetary system. These terms are frequently referenced in the context of monetary policy decisions, the Liquidity Adjustment Facility (LAF), and Statutory Liquidity Ratio (SLR) compliance.

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Option B: communications networking

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Option C: military strategies

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Option D: supply and demand of agricultural products