A
2 only
B
Neither 1 nor 2
C
1 only
D
Both 1 and 2
Correct answer: (c) 1 only
Explanation
Statement 1 is correct because the SDF allows collateral-free liquidity absorption by the RBI. Statement 2 is incorrect because the MSF rate is pegged above the policy Repo rate, whereas the SDF is pegged below it, acting as the floor of the LAF corridor.
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