With reference to the Standing Deposit Facility (SDF) of the Reserve Bank of India, consider the following statements: 1. It enables the Reserve Bank of India to absorb surplus liquidity from the banking system without providing collateral. 2. Funds parked by banks under the SDF are eligible for meeting their Cash Reserve Ratio (CRR) requirements. Which of the statements given above is/are correct? |ForumIAS

Q. With reference to the Standing Deposit Facility (SDF) of the Reserve Bank of India, consider the following statements:
1.It enables the Reserve Bank of India to absorb surplus liquidity from the banking system without providing collateral.
2.Funds parked by banks under the SDF are eligible for meeting their Cash Reserve Ratio (CRR) requirements.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: A

Notes:

Explanation: Statement 2 is not correct. Funds placed under the SDF are reckoned for meeting the Statutory Liquidity Ratio (SLR) requirements of banks, but not their Cash Reserve Ratio (CRR) requirements.

Source- NOA

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