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 ?

(a) 1 and 2 only
(b) 3 only
(c) 1, 2 and 3 ✓ UPSC's answer
(d) 2 and 3 only

Why the answer is (c)

• Statement 2 is correct: Foreign Portfolio/Institutional Investors may hold Government Securities within limits set by the RBI and SEBI, and since 2020 certain securities are 'fully accessible' to them without limit.

• Statement 3 is correct: stock exchanges run separate debt segments — the NSE and BSE have dedicated platforms for trading corporate bonds and G-Secs, including retail platforms.

• Statement 1 is treated as correct in the official key: the RBI has opened liquidity windows to NBFCs — most notably the Special Liquidity Scheme and the Targeted Long-Term Repo Operations during the 2020 crisis — and under the scale-based framework large NBFCs have been brought closer to bank-like liquidity regulation. (Ordinarily the LAF is for banks and primary dealers, so this statement is contestable.)

• Hence 1, 2 and 3, option (c).

Why the other options are wrong

(a) 1 and 2 only: Statement 3 is also correct: exchanges have separate debt trading platforms.
(b) 3 only: Statements 1 and 2 are also treated as correct in the official key.
(d) 2 and 3 only: Statement 1 is treated as correct in the official key.

Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2024, held on 16 June 2024. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.