(i) Repo Transactions: A Repo transaction means RBI making funds available to banks. Reverse Repo on the other hand is a process whereby banks lend to RBI. Both kind of Repo Transactions are against Securities as prescribed by RBI

Revised Liquidity Management Framework: RBI has revised its Liquidity Management Framework vide 6th Bi monthly Monetary Policy 2019-2020 announced on 06.02.2020 wherein it introduced 1 year and 3 years Long Term Repo Operations and announced the discontinuance of Overnight Repo operations. First Long-Term Repo Operations (LTRO) was held on 17.02.2020. The banks can obtain funds at policy rates under; LTRO against Government Securities. On the due date/maturity of Repo (also called 2™ leg of Repo), the bank will return the money with interest and RBI will reinstate their securities to them. The funds under LTROs are provided at Policy rates.

Main Operation. Under Revised Framework as declared by RBI on 06.02.2020, 14-day variable rate Repo/ Reverse Repo will be the main operation. It will be conducted on reporting Friday between 2:303:00 PM. If reporting Friday happens to be a holiday, the auction will be conducted on the preceding working day in Mumbai. The banks as per the requirement as assessed from the inflow and outflow of funds for the coming fortnight, can obtain funds/lend funds through variable rate repo/reverse repo auction.

Fine Tuning. Since RBI has discontinued daily overnight repo under revised framework, there can be instances of excess or shortage of liquidity in the system. The RBI will, in case required, bring Variable Rate Term Repo/Reverse Term Repo with tenor of overnight up to 13 days to fine tune the liquidity in the system.

(ii) Reverse Repo Rate: It is rate of interest at which RBI accepts excess funds from banks/participants. It is also called the Lower Band for liquidity Adjustment Facility to determine the price of money.

(iii) Marginal Standing Facility (MSF): It is the rate at which banks can borrow overnight from the Reserve Bank of India against Govt. Approved Securities. MSF Facility can be availed by banks during acute cash shortage. The MSF Rate is fixed at a certain percentage above Repo Rate. It is also called the Upper Band of RBI Interest Rate Corridor. Banks under MSF can borrow up to excess SLR securities + 2% below SLR from RBI.

The Reverse Repo and MSF facility is available on all days (including Saturdays, Sundays and holidays) between 5:30 PM and 11:59 PM.

(iv) Margin requirements under the Liquidity Adjustment Facility and Marginal Standing Facility: As you have noted above, the banks are required to deposit securities to avail funds through Repo or MSF facility. The RBI vide its circular dated 06.06.2018 has revised the margin requirement as under-

(v) Bank Rate: is long term rate of interest at which RBI lends to banks. RBI here lends funds to banks/F is a8 lender of last resort. (Please always go through RBI site for current rates on repo, reverse repo, MSF, bank rate etc. before going to exam)