With reference to the Standing Deposit Facility SDF consider the following statements 1 The SDF enab...........

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With reference to the Standing Deposit Facility (SDF), consider the following statements:

1. The SDF enables the RBI to suck out excess liquidity from the economy for a period more than 1 year.

2. The G-Secs are not required to be used as collateral.

3. The SDF is usually higher than the Reverse Repo.

Which of the statements given above is/are correct?

1 and 2 only

2 only

2 and 3 only

1, 2 and 3

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Explanation:

Explanation: Understanding the Standing Deposit Facility (SDF): The SDF was introduced through an amendment to the RBI Act, 1934. The SDF works similar to the Reverse Repo. However, the SDF would be different from the Reverse Repo in the following ways: 1. Under the SDF route, the RBI would not be required to provide the G-Secs as collateral to the banks. Hence, it would enable the RBI to absorb huge amount of liquidity from the economy without the G-Secs acting as collateral. 2. The SDF would be available for parking the funds with the RBI on an overnight basis. But, the duration of the Reverse Repo could be longer. 3. Presently, the Reverse Repo is 3.35%, while the SDF rate has been fixed higher at 3.75%.