UPSC Prelims 2024 Question:

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?

Explanation: 

• The Liquidity Adjustment Facility (LAF) is a tool used by the Reserve Bank India (RBI) to manage liquidity and money supply in the economy.
  
  
• As of the latest regulations, all Scheduled Commercial Banks (excluding Regional Rural Banks) and Primary Dealers (PDs) having Current Accounts and SGL Accounts with Reserve Bank, Mumbai are allowed direct access to the LAF window. NBFCs, despite being important players in the financial sector, do not have direct access to this facility. So, statement 1 is not correct.
  
  
• Foreign Institutional Investors (and Foreign Portfolio Investors) are allowed to invest in government securities (G-Secs) within certain limits set by the RBI and SEBI (Securities and Exchange Board of India). So, statement 2 is correct.
  
  
• Debt Markets are markets for fixed income securities issued by Central and State Governments, Municipal Corporations, Govt. bodies and commercial entities like Financial Institutions, Banks, Public Sector Units, Public Ltd. companies and also structured finance instruments.
  
  
• In India, stock exchanges like the National Stock Exchange and Bombay Stock Exchange offer separate trading platforms for debt instruments, including corporate bonds, government securities, and other fixed-income securities. These platforms provide a dedicated space for trading in debt instruments, which helps in better price discovery and liquidity. So, statement 3 is correct.
  
  

Therefore, option (4) is the correct answer.

Subject: Economics | Money and Banking