Second, a single policy rate removes the confusion arising out of policy rate alternating between the repo and the reverse repo rates. It also improves the accuracy of signalling monetary policy stance. Third, the institution of MSF provides a safety valve against unanticipated liquidity shocks. It will help stabilise the overnight interest rate around the repo rate, particularly during deficit liquidity situation.
Fourth, a fixed interest rate corridor set by MSF rate and reverse repo rate, by reducing uncertainty and avoiding communication difficulties associated with a variable corridor, will help keep the overnight average call money rate close to the repo rate. BIS central bankers’ speeches  7  How effective is the new operating framework?