Q. Consider the following with regard to the Liquidity Adjustment Facility (LAF) operated by the Reserve Bank of India (RBI):

1. It is used to bring changes in the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
2. It involves the repo and reverse repo rates as its main instruments.
3. It is used to regulate the bank rate directly.

Which of the above statements is/are correct?
Answer: Only 2
Notes: The Liquidity Adjustment Facility (LAF) is a tool used by the RBI to manage liquidity in the banking system mainly through repo and reverse repo operations (statement 2 is correct). It does not directly involve CRR, SLR, or bank rate adjustments (statements 1 and 3 are incorrect). Thus, only statement 2 is correct.