Consider the following statements:In India, Non- Banking Financial Companies can access the Liquidit

Question

Consider the following statements:In India, Non- Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of India.In India, Foreign Institutional Investors can hold the Government Securities (G-Secs).In India, Stock Exchanges can offer separate trading platforms for debts.Which of the statements given above is/are correct?

Accepted Answer

LAF is a facility extended by RBI to the scheduled commercial banks (excluding RRBs) and Primary Dealers (PDs) to avail of liquidity in case of requirement or park excess funds with RBI in case of excess liquidity on an overnight basis against the collateral of G-Secs including SDLs. Basically, LAF enables liquidity management on a day to day basis.The operations of LAF are conducted by way of repurchase agreements (repos and reverse repos) with RBI being the counter-party to all the transactions. All Scheduled Commercial Banks (excluding Regional Rural Banks) and Primary Dealers (PDs) having Current Account and SGL Account with RBI, Mumbai will be eligible to participate in the Repo and Reverse Repo auctions. Only some specified NBFCs form part of PDs and major NBFCs not part of PDs remain outside the preview of accessing LAF window of RBI. Hence statement 1 is not correct.FIIs who obtain specific approval from SEBI have been permitted to invest 100% of their portfolios in debt securities. Such investment may be in listed or to be listed corporate debt securities or in dated government securities, and is treated to be part of the overall limit on external commercial borrowing. Hence statement 2 is correct.With an aim to develop corporate debt market in the country, Sebi allowed creation of a separate debt segment on stock exchanges, wherein banks are allowed to become trading members of the bourses and trade in this market. NSE became the first to unveil a separate trading platform for debts. Hence statement 3 is correct.