SSC Economics Sample Paper NCERT Sample Paper-3

  • question_answer
    Consider the following statement:
    1. Liquidity Adjustment Facility (LAF) was introduced by RBI in 2000.
    2. RBI has the discretion to change the spread between the repo rate and the reverse repo rate as when appropriate. Which of these statement is/are correct?

    A)  Only 1 

    B)  Only 2

    C)  Both 1 and 2    

    D)  neither 1 nor 2

    Correct Answer: C

    Solution :

    [c] Liquidity adjustment facilities are used to aid banks in resolving any short-term cash shortages during periods of economic instability or from any other form of stress caused by forces beyond their control. Various banks will use eligible securities as collateral through a repo agreement and will use the funds to alleviate their short-term requirements, thus remaining stable.

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