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    The ________ and _______ determine the corridor for the daily movement in the weighted average call money rate.
    Question

    The ________ and _______ determine the corridor for the daily movement in the weighted average call money rate.

    A.

    Reverse repo, discount rate

    B.

    Marginal standing facility, Reverse repo rate

    C.

    Liquidity adjustment facility, repo rate

    D.

    Bank rate, repo rate
     

    Correct option is B

    The Marginal standing facility and Reverse repo rate determine the corridor for the daily movement in the weighted average call money rate.
    Marginal Standing Facility (MSF) refers to the rate at which banks can borrow overnight funds from the RBI in exchange for authorized government securities. This is applicable in emergency situations such as the inter-bank liquidity dries up completely and results in volatility in the overnight inter-bank rate. 
    Reverse repo rate is said to be that rate of interest at which the central bank (RBI in India) borrows money from the commercial banks for a short term. It helps the central bank to have a ready source of liquidity at the time of need. RBI offers great interest rates in return for the amount supplied by the commercial banks.
        

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