Question : The ________ and _______ determine the corridor for the daily movement in the weighted average call money rate.
Option 1: Reverse repo rate, discount rate
Option 2: Marginal Standing Facility, reverse repo rate
Option 3: Liquidity adjustment facility, repo rate
Option 4: Bank rate, repo rate
Correct Answer: Marginal Standing Facility, reverse repo rate
Solution : The correct option is Marginal Standing Facility, reverse repo rate .
The marginal standing facility (MSF) and the reverse repo rate determine the corridor for the daily movement in the weighted average call money rate. The MSF is the upper bound of the corridor, while the reverse repo rate serves as the lower bound. The central bank adjusts these rates to influence short-term interest rates and maintain stability in the financial system. The corridor helps in managing liquidity in the money market and achieving the monetary policy objectives of the central bank.
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