Functions of RBI

Money

Anything that can be generally acceptable as payment for goods and services or settlement of debts is Money. It is the element of confidence that others will accept it as a payment is what gives the purchasing power to money. The major functions of money are: It a medium of exchange Its a unit of […]

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Marginal Standing Facility

Marginal Standing Facility is a new Liquidity Adjustment Facility (LAF) window created by Reserve Bank of India in its credit policy of May 2011.  MSF is the rate at which the banks are able to borrow overnight funds from RBI against the approved government securities. The question is – Banks are already able to borrow […]

Reverse Repo Rate

Reverse repo rate is the rate of interest at which the RBI borrows funds from other banks in the short term . This is done by RBI selling government bonds / securities to banks with the commitment to buy them back at a future date. The banks use the reverse repo facility to deposit their […]

Liquidity Adjustment Facility (LAF)

Liquidity Adjustment Facility (LAF) is the primary instrument of Reserve Bank of India for modulating liquidity and transmitting interest rate signals to the market. It refers to the difference between the two key rates viz. repo rate and reverse repo rate. Informally, Liquidity Adjustment Facility is also known as Liquidity Corridor. When LAF was introduced? On […]

Open Market Operations

Open Market Operations refer to the purchase and sale of the Government securities (G-Secs) by RBI from / to market. The objective of Open Market Operations is to adjust the rupee liquidity conditions in the economy on a durable basis. When RBI sells government security in the markets, the banks purchase them. When the banks […]

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