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    Question

    What is the primary function of the Standing Deposit

    Facility (SDF)?
    A Provide liquidity to banks Correct Answer Incorrect Answer
    B Absorb excess liquidity from banks without providing collateral Correct Answer Incorrect Answer
    C Manage shortterm interest rates Correct Answer Incorrect Answer
    D Control inflation by managing money supply Correct Answer Incorrect Answer
    E Fund longterm infrastructure projects Correct Answer Incorrect Answer

    Solution

    The Standing Deposit Facility (SDF) allows the RBI to absorb excess liquidity from the banking system without requiring the banks to provide collateral. This is a tool used to manage liquidity in the economy.

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