INSTITUTE: University School of Business

DEPARTMENT: Commerce
Bachelor of Commerce
Subject Name: COMMERCE APTITUDE
Code: 21CMT-206

Liquidity Measures DISCOVER . LEARN . EMPOWER

 • Space for visual (size 24)

COMMERCE
APTITUDE
Course Objectives & Outcome Will be covered in this
CO Number Title Level lecture

CO1 What is DATA COLLECTION? Remember

 
CO2 How can be collected through various methods? Understand
 
CO3 Some real-life examples of data collection Understand

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 Liquidity
Measures
• Introduction
• MSF
• Difference between Repo Rate and MSF
• CRR
• Bank Rate
https://media.istockphoto.com/vectors/concepts-for-creative-p
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• Policy Corridor k=20&m=464806966&s=612x612&w=0&h=ffdxp_EGu9uiddJt51
• Liquidity Injection tvimfbniMrGWffNxKWHihxLNk=

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Introduction
• Recently, the Reserve Bank of India (RBI) has extended the relaxation relating
to Marginal Standing Facility (MSF) scheme till 30th September 2020.

 It has also extended the relaxation relating to maintenance of Cash Reserve

Ratio (CRR) up to 25th September 2020.
 This was done in view of the hardships being faced by banks in terms of social
distancing at work and consequent strain on reporting requirements.

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MSF
 MSF is a window for scheduled banks to borrow overnight from the RBI in an emergency
situation when interbank liquidity dries up completely.
Under interbank lending, banks lend funds to one another for a specified term.

 Banks borrow from the RBI by pledging government securities at a rate higher than the repo
rate under Liquidity Adjustment Facility (LAF).
 Repo rate is the rate at which the RBI lends money to commercial banks against the
securities in the event of any shortfall of funds.
 Loans provided at repo rate are provided for a specified period with an obligation that the
bank will repurchase the securities back at a predetermined rate.

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Differences between Repo Rate and MSF
o Repo rate is the rate at which RBI lends money to commercial banks, while MSF is a rate at
which RBI lends money to scheduled banks.
o The repo rate is given to banks that are looking to meet their short-term financial needs. While,
the MSF is meant for lending overnight to banks.
o Lending at repo rates involves a repurchase agreement of securities. While it is not so in MSF.
o Under MSF, banks are also allowed to use the securities that come under Statutory Liquidity
Ratio (SLR) in the process of availing loans from RBI.
o Under SLR, commercial banks are mandated by RBI to maintain a stipulated proportion of
their deposits in the form of liquid assets like cash, gold and unencumbered (free from debt)
securities.

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Cash Reserve Ratio:
 CRR is the amount of liquid cash that banks have to maintain with the
RBI, as a percentage of their total deposits.

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Bank Rate
 A bank rate is the interest rate at which a nation's central bank lends money to
domestic banks, often in the form of very short-term loans. Managing the bank
rate is a method by which central banks affect economic activity. Lower bank
rates can help to expand the economy by lowering the cost of funds for
borrowers, and higher bank rates help to reign in the economy when inflation is
higher than desired.

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What is Corridor in monetary policy?
 The RBI’s monetary policy tool kit that includes the instruments like repo, LAF
often undergoes change. With time and financial sector developments new
instruments may come. One such newly inducted instrument is the monetary
policy corridor. As the name suggests, it indicate an area between two rates of
the RBI’s monetary policy.
 Monetary Policy Corridor refers to the area between the lower reverse repo rate
and the upper ceiling rate of MSF rate. Reverse repo rate will be the lowest of
the policy rates whereas Marginal Standing Facility is something like an upper
ceiling with a higher rate than the repo rate. The MSF rate and reverse repo rate
determine the corridor for the daily movement in the weighted average call
money rate.
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Liquidity Injection
 When a central bank makes a short-term loan to a member institution, it is said
to be injecting liquidity. In the United States, the Federal Reserve maintains a
target federal funds rate for banks to loan money overnight to each other. If the
lending banks are unwilling to offer enough credit at this rate, the central bank
may step in and make loans itself through the discount window. In this role, the
central bank is operating as the lender of last resort and is said to be injecting
liquidity.

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 Summary
• Introduction
• MSF
• Difference between Repo Rate and MSF
• CRR
• Bank Rate
• Policy Corridor
• Liquidity Injection

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 APPLICATIONS
After going through this presentation, 
• Students will get an insight into meaning of data collection.
• They will also come to comprehend the reasons of data collection.
• Students will be mindful of methods of data collection.
• Students can understand the reasons to collect online data .

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Assessment Pattern

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 REFERENCES
WEBSITES
• https://www.questionpro.com/blog/data-collection/
• https://en.wikipedia.org/wiki/Data_collection
• https://ori.hhs.gov/education/products/n_illinois_u/datamanagement/dctopic.html
• https://www.jotform.com/data-collection-methods/
• https://www.formpl.us/blog/data-collection-method.
BOOKS
• UGC NET TRUE MAN
• UGC NET ARIHANT
VIDEO LINKS
https://www.youtube.com/watch?v=XEdXKrljNRU
https://www.youtube.com/watch?v=csh2g8Cx1Hs

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THANK YOU

For queries
Email: vinay.e8505@cumail.in