Which of the following liquidity management tools was introduced by the RBI as an overnight, standing facility to absorb liquidity without requiring collateral?

💡 Solution & Explanation

The Standing Deposit Facility is a collateral-free liquidity window introduced by the Reserve Bank of India to absorb excess funds from commercial banks. Unlike the Marginal Standing Facility, it does not require banks to pledge government securities as collateral. Central bank liquidity management instruments are crucial for economics papers.