Consider the following statements regarding instruments of monetary policy:<br>1. Standing deposit facility (SDF) rate was introduced in April 2022.<br>2. SDF rate replaced fixed reverse repo rate as the floor of the LAF corridor.<br>Which of the statements given above is/are <strong>correct</strong>?
- A. 1 only
- B. 2 only
- C. Both 1 and 2 ✓
- D. Neither 1 nor 2
Correct Answer: C. Both 1 and 2
Explanation
The Standing Deposit Facility (SDF) was operationalized in April 2022 by the RBI to absorb liquidity without collateral, replacing the fixed reverse repo rate as the floor of the Liquidity Adjustment Facility (LAF) corridor.
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