Match the monetary policy tools and mechanisms of the Reserve Bank of India (RBI) listed under Column I with their correct operational characteristics described under Column II.
- Marginal Standing Facility (MSF)Emergency overnight borrowing window allowing commercial banks to borrow against government securities at a rate higher than the Repo rate.
- Standing Deposit Facility (SDF)Uncollateralized floor mechanism introduced to absorb surplus liquidity from commercial banks without providing government securities.
- Cash Reserve Ratio (CRR)Mandatory share of Net Demand and Time Liabilities (NDTL) that commercial banks must park with the RBI purely as cash reserves, yielding no interest.
- Statutory Liquidity Ratio (SLR)Mandatory share of Net Demand and Time Liabilities (NDTL) that commercial banks must maintain in liquid assets like gold, cash, or unencumbered G-Secs.
Answer
Marginal Standing Facility (MSF) pairs with the emergency overnight borrowing window against securities; Standing Deposit Facility (SDF) pairs with the uncollateralized liquidity absorption mechanism; Cash Reserve Ratio (CRR) pairs with mandatory cash reserves parked with the RBI without interest; Statutory Liquidity Ratio (SLR) pairs with mandatory liquid assets (gold, G-Secs) maintained by banks themselves.
Each monetary policy tool matches its operational feature: MSF is an emergency borrowing window above repo requiring collateral; SDF acts as an uncollateralized liquidity absorption floor; CRR represents non-interest-bearing cash parked with RBI; and SLR denotes liquid assets (primarily G-Secs and gold) held by commercial banks.
Step-by-Step Solution
Key Concept
Quantitative Monetary Policy Instruments and Liquidity Adjustment Facility (LAF) Corridor Mechanics