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Liquidity adjustment facility (LAF) and Marginal Standing facility (MSF): Understanding Monetary Policy (for UPSC CSE)

Lesson 8 of 9 • 850 upvotes • 9:33 mins

Ayussh Sanghi

This lesson covers the 2 most important concepts in monetary policy: Liquidity adjustment facility (LAF) and Marginal Standing facility (MSF). It starts with the definition of LAF, how LAF works and its importance. It then goes on to deal with the MSF, which is a new form of LAF, which helps in overnight borrowing of banks. This lesson also covers the important reasons as to why the MSF was introduced.