Consider the following statements: 1. In India, Non-Banking Financia

Consider the following statements:

  • 1. In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of India.
  • 2. In India, Foreign Institutional Investors can hold the Government Securities (G-Secs).
  • 3. In India, Stock Exchanges can offer separate trading platforms for debts.

Which of the statements given above is/are correct ?

1 and 2 only
3 only
1, 2 and 3
2 and 3 only
This question was previously asked in
UPSC IAS – 2024
The correct option is D.
Statement 1 is incorrect. The Liquidity Adjustment Facility (LAF) is a tool used by the Reserve Bank of India (RBI) to inject or absorb liquidity into the banking system. It is primarily accessible to Scheduled Commercial Banks (SCBs). Non-Banking Financial Companies (NBFCs) do not have direct access to the LAF window.
Statement 2 is correct. Foreign Institutional Investors (FIIs), now largely categorized under Foreign Portfolio Investors (FPIs), are permitted by the RBI to invest in Government Securities (G-Secs) within prescribed limits and frameworks.
Statement 3 is correct. Stock exchanges in India, such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), have established separate trading platforms specifically for debt instruments, including corporate bonds, government securities, State Development Loans, etc., to facilitate their trading.
RBI operates LAF through repurchase agreements (repos) and reverse repos. While NBFCs cannot access LAF, some large NBFCs may access funds from the banking system or the market, indirectly influenced by LAF rates. RBI also has other windows like Marginal Standing Facility (MSF) for banks and Standing Deposit Facility (SDF).