Q. With reference to the Discount and Finance House of India Ltd. (DFHI), consider the following statements:
1.It was set up in 1988 by the RBI, public sector banks, and public financial institutions.
2.Its primary objective was to bring stability to the Indian banking system by providing liquidity.
3.After the RBI transferred its stake, DFHI was renamed DFHI SBI and functions as a secondary dealer in the financial market.
Which of the statements given above is/are correct?

[A] 1 only

[B] 1 and 2 only

[C] 2 and 3 only

[D] 1, 2 and 3

Answer: B
Notes:

Explanation:

  • Statement 1: DFHI was established in April 1988 by the RBI, public sector banks, and financial investment institutions like LIC, GIC, and UTI.
  • Statement 2: The establishment of DFHI was driven by the need to balance liquidity in the Indian banking system and provide liquidity to money market instruments.
  • Statement 3: The RBI transferred its holding in DFHI to the SBI arm SBI Gilts Limited, and its new name is SBI DFHI, not DFHI SBI. It functions as the “biggest primary dealer” in the economy, not a secondary dealer.
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