Consider the following statements with respect to different monetary policy instruments:
1. To tackle the liquidity crunch in the short term, the banks borrow money from the Reserve Bank of India (RBI) at repo rate only with collateral.
2. In times of excess cash in the economy, like demonetization, the RBI can borrow money from the banks without collateral.
Which of the statements given above is/are correct?
1 only
2 only
Both 1 and 2
Neither 1 nor 2
· Under the Liquidity Adjustment Facility, the liquidity in the economy is managed in the short term using repo and reverse repo transactions, which are done in government securities as collateral.
· In 2018, the government introduced the Standing Deposit Facility to sterilize excess liquidity in the economy. Accordingly, in times of excess liquidity, such as demonetization, the Reserve Bank of India (RBI) may ask the banks to deposit excess liquidity with RBI at reverse repo rate, without the need for collateral.
The term 'West Texas Intermediate', sometimes found in news, refers to a grade of
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