Financial Awareness - Risk, Stability & Emerging Finance
Which of the following statements about the Liquidity Adjustment Facility (LAF) and Government Securities is correct?
Which of the following statements about the Liquidity Adjustment Facility (LAF) and Government Securities is correct?
hard Q9 of 15
Step-by-Step Solution
Step 1: Understand Liquidity Adjustment Facility (LAF)
LAF is a monetary policy tool used by RBI to manage liquidity by repo and reverse repo operations involving government securities.Step 2: Analyze options
LAF involves RBI buying/selling government securities to inject or absorb liquidity; it is not unrelated to G-Secs, nor a retail scheme, and SEBI does not conduct LAF.Final Answer:
LAF operations involve RBI buying and selling government securities to manage liquidity → Option DQuick Check:
LAF involves RBI buying/selling G-Secs for liquidity = correct ✅
Quick Trick: LAF = RBI's liquidity tool using government securities.
Common Mistakes:
- Assuming LAF is unrelated to G-Secs or conducted by SEBI.
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