Standing Deposit Facility (SDF)
Context:
The Standing Deposit Facility (SDF), introduced by the Reserve Bank of India in April 2022, completes three years as a key tool in India’s liquidity management framework.
Relevance:
GS-03 (Economy)
What is SDF?
It is a monetary policy instrument used by the RBI to absorb surplus liquidity from the banking system without providing collateral.
Replaced the Fixed Rate Reverse Repo as the floor of the Liquidity Adjustment Facility (LAF) corridor.
Functions as an overnight liquidity absorption tool but with flexibility to extend the tenure.
Open to all LAF-eligible entities and operates 365 days a year, including holidays.
Prelims Question:
Q. With reference to the Standing Deposit Facility (SDF), consider the following statements:
It absorbs liquidity from banks without providing collateral.
It has replaced the Marginal Standing Facility as the upper limit of the LAF corridor.
It is available only on working days.
Which of the above statements is/are correct?
(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
Answer: (a) 1 only
