Economics · Monetary Policy Instruments
What is the primary difference between the Standing Deposit Facility (SDF) and the Reverse Repo Rate as tools for liquidity absorption?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1SDF is a qualitative tool, while Reverse Repo is a quantitative tool
- 2SDF is used for long-term liquidity, while Reverse Repo is for overnight only
- 3SDF does not require the RBI to provide collateral of Government Securities, while Reverse Repo does✓
- 4SDF requires collateral of Government Securities, while Reverse Repo does not
Correct answer
SDF does not require the RBI to provide collateral of Government Securities, while Reverse Repo does
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