Explanation:

The LAF is the key element in the monetary policy operating framework of the RBI (introduced in 2000).

LAF is a facility extended by the Reserve Bank of India to the scheduled commercial banks (excluding RRBs) and primary dealers to avail of liquidity in case of requirement or park excess funds with the RBI in case of excess liquidity on an overnight basis against the collateral of Government securities including State Government  securities. Basically LAF enables liquidity management on a day to day basis. Liquidity adjustment facility (LAF) is a monetary policy tool which allows banks to borrow money through repurchase agreements or repos. Liquidity of a more durable nature are managed with other instruments like, cash reserve ratio (CRR) or Market Stabilization Scheme (MSS)