| Liquidity adjustments facility of the RBI includes use of: |
| 1. Repo and reverse Repo. |
| 2. Selective controls |
| 3. Market stabilization |
| 4. Statutory Liquidity Ratio |
| Select the correct answer using the code given below: |
A) Only 1 and 3
B) Only 2 and 4
C) Only 1, 2 and 3
D) All 1, 2, 3 and 4
Correct Answer: A
Solution :
Liquidity Adjustment Facility (LAF) is the primary instrument of Reserve Bank of India for modulating liquidity and transmitting interest rate signals to the market. It refers to the difference between the two key rates viz. repo rate and reverse repo rate. Informally, Liquidity Adjustment Facility is also known as Liquidity Corridor.
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