Which of the statement/s given below is/are correct?
- Liquidity Adjustment Facility (LAF) refers to the Reserve Bank's operations through which it injects/absorbs liquidity into/from the banking system.
- Marginal Standing Facility (MSF) is the penal rate at which banks can borrow, on an overnight basis, from the Reserve Bank.
- Unlike LAF, MSF can be obtained without pledging any collateral securities by the bank.
Choose the correct option from the following.
Correct answer: D
Explanation
Statement 1 is right: the Liquidity Adjustment Facility lets the RBI inject or absorb liquidity through repo and reverse-repo operations. Statement 2 is right too: the Marginal Standing Facility is a penal-rate overnight borrowing window above the repo rate. Statement 3 is wrong because MSF borrowing is not collateral-free; banks tap it against eligible securities, including by dipping into their SLR holdings.