Explanation:

Directions of the Supreme Court in Prakash Singh vs Union of India
In Prakash Singh v. Union of India, the SC relied on the eight reports of the National Police Commission (1979-1981) appointed by the Union. 

• Constitute a State Security Commission in every state that will lay down policy for police functioning, evaluate police performance, and ensure that state governments do not exercise unwarranted influence on the police.
• Constitute a Police Establishment Board in every state that will decide postings, transfers and promotions for officers below the rank of Deputy Superintendent of Police, and make recommendations to the state government for officers of higher ranks.
• Constitute Police Complaints Authorities at the state and district levels to inquire into allegations of serious misconduct and abuse of power by police personnel.

The commission recommended that there should be a PCA at the state level, headed by a retired judge of the SC or high court chosen out of a panel of names proposed by the chief justice of the state. 

• A similar structure was envisaged for the PCA at the district level. 
• In addition, the PCAs would be assisted by members selected by the state from panels prepared by the State Human Rights Commission, Lokayuktas and the State Public Service Commissions. 

The state PCA would look into murder, rape and other serious misconduct committed by the police while the district PCA would look into extortion, and incidents involving serious abuse of authority. 

• The recommendations of the PCA would be binding on the state.

Provide a minimum tenure of at least two years for the DGP and other key police officers (e.g., officers in charge of a police station and district) within the state forces, and the Chiefs of the central forces to protect them against arbitrary transfers and postings.

• Ensure that the DGP of state police is appointed from amongst three senior-most officers who have been empanelled for the promotion by the Union Public Service Commission on the basis of length of service, good record and experience.

Separate the investigating police from the law and order police to ensure speedier investigation, better expertise and improved rapport with the people.

• Constitute a National Security Commission to shortlist the candidates for appointment as Chiefs of the central armed police forces.

Hence only statements 1&2 are correct.