Q. Which of the following is/are liquidity management instrument/s?
1.Open market operations
2.Forex swaps
3.Market stabilization scheme
How many of the statements given above are correct?

[A] Only one

[B] Only two

[C] Only three

[D] None

Answer: C
Notes:

Explanation: Liquidity Adjustment Facility (LAF): The LAF refers to the Reserve Bank’s operations through which it injects/absorbs liquidity into/from the banking system.

  • It consists of overnight as well as term repo/reverse repos (fixed as well as variable rates), SDF and MSF.
  • Apart from LAF, instruments of liquidity management include outright open market operations (OMOs), forex swaps and market stabilization scheme (MSS).

Source: FORUMIAS

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