A
Neither 1 nor 2
B
1 only
C
2 only
D
Both 1 and 2
Correct answer: (c) 2 only
Explanation
Statement 1 is incorrect because VRRR (Variable Rate Reverse Repo) is used to absorb excess liquidity from the system, whereas Variable Rate Repo (VRR) is used to inject liquidity. Statement 2 is correct as LAF operations directly influence the Weighted Average Call Rate, which serves as the operating target of monetary policy.
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