UPSC Prelims 2014 · Question 11 of 100
UPSC Prelims 2014 question on Marginal Standing Facility Rate
- ExamUPSC CSE
- Year2014
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicMoney Market
- DifficultyEasy
- TypeDirect
The terms 'Marginal Standing Facility Rate' and 'Net Demand and Time Liabilities', sometimes appearing in news, are used in relation to
Show answer
Answer: A. banking operations
Verdict
The answer is banking operations. Marginal Standing Facility Rate and Net Demand and Time Liabilities are both Reserve Bank of India terms from monetary policy and banking regulation.
Analysis
The Marginal Standing Facility, effective from 9 May 2011, lets banks borrow overnight from the RBI against approved securities, originally up to one per cent of their Net Demand and Time Liabilities. Net Demand and Time Liabilities is the aggregate of a bank's deposits and other liabilities, and is the base on which the Cash Reserve Ratio and Statutory Liquidity Ratio are also computed. The remaining three options, communications networking, military strategies and agricultural supply and demand, share no vocabulary with either term and exist only to fill the page.
Source
The Hindu current affairs coverage and Uma Kapila.
How to crack it
When two unfamiliar terms are yoked together in the stem, look for a shared word that fixes the domain. Liabilities is a balance sheet word, and demand and time are the two standard deposit classes, so the pair can only be banking. This works because UPSC pairs terms that come from the same source paragraph. Also note the news hook: MSF was announced in the 2011 to 2012 monetary policy, and any rate newly created by the RBI is worth logging with its base, its tenor and its ceiling.