General Knowledge · General Awareness
Which of the following statements regarding the monetary policy instruments and liquidity facilities of the Reserve Bank of India is INCORRECT?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Open Market Operations (OMOs) involve the outright purchase or sale of government securities by the RBI to regulate durable liquidity, whereas 'Operation Twist' involves the simultaneous buying of long-tenor and selling of short-tenor securities.
- 2Unlike the reverse repo facility, the Standing Deposit Facility (SDF) allows the RBI to absorb liquidity from commercial banks without the requirement of providing government securities as collateral.
- 3In the Liquidity Adjustment Facility (LAF) corridor, the Standing Deposit Facility (SDF) rate acts as the ceiling to absorb unlimited liquidity, while the Marginal Standing Facility (MSF) rate serves as the floor.✓
- 4The Cash Reserve Ratio (CRR) is the mandatory proportion of a bank's Net Demand and Time Liabilities that must be maintained as cash with the RBI, and it earns no interest for the banks.
Correct answer
In the Liquidity Adjustment Facility (LAF) corridor, the Standing Deposit Facility (SDF) rate acts as the ceiling to absorb unlimited liquidity, while the Marginal Standing Facility (MSF) rate serves as the floor.
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