[Solved] 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?

Q52. 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?

1. 1 and 2 only
2. 3 only
3. 1, 2 and 3
4. 2 and 3 only

Answer: 4

• Liquidity Adjustment Facility (LAF)

• LAF – facility extended by RBI to the scheduled commercial banks

(excluding RRBs) and Primary Dealers (PDs)

• Avail of liquidity or park excess funds with RBI

• Tools – repos and reverse repos

• Who can avail:

• All Scheduled Commercial Banks (excluding Regional Rural Banks)

• Primary Dealers (PDs) having Current Account and SGL Account with RBI

• Only some specified NBFCs form part of Primary Dealers and major NBFCs not part of PDs remain outside the preview of accessing LAF window of RBI.

• Hence statement 1 is not correct.

Foreign Institutional Investors (FIIs)

Foreign institutional investment is portfolio investment in the stock market by buying shares and debentures in another country by foreign institutions like mutual funds, insurance and pension funds etc

• Registered with SEBI

• FIIs with specific approvals from SEBI can 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.

Foreign Institutional Investors (FIIs)

From RBI Document:

The National Stock Exchange (NSE) launched country’s first dedicated debt trading platform on May 2013.

• The separate debt trading platform will provide retail investors to invest in corporate bonds on a liquid and transparent exchange platform.

• An ideal platform to buy and sell at optimum prices and help corporates to get adequate demand, when they are issuing the bonds, according to a release on this platform.

• Banks are allowed to become trading members of the exchange and trade in this market.

• Hence statement 3 is correct.