With reference to the Standing Deposit Facility (SDF), consider the following statements:

The SDF was introduced by the Reserve Bank of India to absorb liquidity without providing government securities.

The SDF replaced the reverse repo as a floor for the liquidity adjustment facility corridor.

Select the correct option from the codes given below:

Question

The SDF was introduced by the Reserve Bank of India to absorb liquidity without providing government securities. Correct: The Standing Deposit Facility was introduced by the Reserve Bank of India to absorb excess liquidity from commercial banks without the need to provide government securities in return, making it a collateral-free arrangement.
The SDF replaced the reverse repo as a floor for the liquidity adjustment facility corridor. Correct: The SDF replaced the reverse repo as the floor for the liquidity adjustment facility corridor in 2022, allowing the RBI to manage liquidity more effectively during periods of surplus.

GKToday Admin · Accepted Answer

Both 1 & 2

The SDF was introduced by the Reserve Bank of India to absorb liquidity without providing government securities. Correct: The Standing Deposit Facility was introduced by the Reserve Bank of India to absorb excess liquidity from commercial banks without the need to provide government securities in return, making it a collateral-free arrangement.
The SDF replaced the reverse repo as a floor for the liquidity adjustment facility corridor. Correct: The SDF replaced the reverse repo as the floor for the liquidity adjustment facility corridor in 2022, allowing the RBI to manage liquidity more effectively during periods of surplus.

Current Affairs