What happens to the banking system when the central bank reduces the Marginal Standing Facility (MSF) rate?

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Economics · Monetary Policy

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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The cost of overnight emergency borrowing for banks decreases

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Answer 1

The cost of overnight emergency borrowing for banks decreases

Answer 2

Banks are forced to keep more gold reserves with the central bank

Answer 3

Liquidity in the inter-bank market becomes extremely tight

Answer 4

The government reduces its total fiscal deficit automatically

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