Reserve Bank’s Liquidity Adjustment Facility (LAF) refers to____ • Liq
Right Answer is: C
• Liquidity Adjustment Facility (LAF) is the primary instrument of RBI for manipulating liquidity and channelizing interest rate signals to the market.
• Liquidity Adjustment Facility (LAF) is the difference between the repo rate and reverse repo rate.
• Repo Rate- Literal meaning of the word repo is to repurchase. Under this system the banks borrow money from Reserve Bank of India by
putting government securities as collateral. It is a short term
instrument of monetary policy.
• Reverse Repo Rate- it is opposite of the Repo Rate. Under this system RBI borrows money from Bank by lending government
securities. It is also a short term instrument of monetary policy.