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?
- A.1 and 2 only
- B.3 only
- C.1,2 and 3
- D.2 and 3 only
Correct answer
Explanation
The correct answer is D, 2 and 3 only. Foreign investors may hold G-Secs and exchanges run debt platforms, but the LAF window is not open to NBFCs.
The Liquidity Adjustment Facility is the RBI's tool for managing day-to-day liquidity through repo and reverse repo operations. Only eligible institutions take part: scheduled commercial banks (other than regional rural banks), scheduled state co-operative banks, small finance banks and standalone primary dealers. NBFCs raise money from banks and markets instead. Foreign portfolio investors, the successors of FIIs, can buy central and state government securities within the limits set by the RBI, and some bonds are fully open to them. Stock exchanges such as the NSE and BSE run dedicated debt segments for trading bonds.
A is wrong: statement 1 is false because NBFCs cannot borrow under LAF.
B is wrong: it leaves out statement 2, which is correct.
C is wrong: statement 1 is not correct.
Exam tip: LAF = repo and reverse repo for banks and primary dealers, not NBFCs; FPIs can hold G-Secs within RBI limits.
Practice Questions
View allWith reference to India, consider the following pairs:
Organization : Union Ministry
I. The National Automotive Board : Ministry of Commerce and Industry
II. The Coir Board : Ministry of Heavy Industries
III. The National Centre for Trade Information : Ministry of Micro, Small and Medium Enterprises
How many of the above pairs are correctly matched?
- A.Only one
- B.Only two
- C.All the three
- D.None
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Each organisation is paired with the wrong ministry. The National Automotive Board works under the Ministry of Heavy Industries; it supports the automobile sector with testing and certification work and helps run schemes for the industry.
Read the full explanation →If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do?
1. Cut and optimize the Statutory Liquidity Ratio
2. Increase the Marginal Standing Facility Rate
3. Cut the Bank Rate and Repo Rate
Select the correct answer using the code given below:
- A.1 and 2 only
- B.2 only
- C.1 and 3 only
- D.1, 2 and 3
Show answer
An expansionist policy aims to make money cheaper and more plentiful, so the RBI would not raise the Marginal Standing Facility rate, which makes borrowing dearer.
Read the full explanation →Which of the following is/are the aim/aims of "Digital India" Plan of the Government of India?
1. Formation of India's own Internet companies like China did.
2. Establish a policy framework to encourage overseas multinational corporations that collect Big Data to build their large data centres within our national geographical boundaries.
3. Connect many of our villages to the Internet and bring Wi-Fi to many of our schools, public places and major tourist centres.
Select the correct answer using the code given below:
- A.1 and 2 only
- B.3 only
- C.2 and 3 only
- D.1, 2 and 3
Show answer
Connecting villages to the Internet and offering Wi-Fi in schools and public places is part of Digital India; the other two are not its stated aims.
Read the full explanation →With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?
- A.It is the investment through capital instruments essentially in a listed company.
- B.It is a largely non-debt creating capital flow.
- C.It is the investment which involves debt-servicing.
- D.It is the investment made by foreign institutional investors in the Government securities.
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FDI comes in as equity ownership, so India does not have to repay it with interest. Under Indian rules, FDI is investment by a person resident outside India in an unlisted company, or in ten per cent or more of the paid-up equity of a listed company.
Read the full explanation →PAHAL, an initiative to transfer the subsidy to direct bank account of the beneficiaries, is related to
- A.LPG consumers
- B.internet consumers
- C.farmers for fertilisers
- D.Central Government Employees for medical treatment
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PAHAL is the direct benefit transfer scheme for subsidy on cooking gas (LPG). PAHAL stands for Pratyaksh Hanstantrit Labh, meaning direct transferred benefit.
Read the full explanation →