The Liquidity Adjustment Facility (LAF), allowing banks to borrow money through repurchase agreements, was introduced in India based on the recommendations of which committee?

💡 Solution & Explanation

The Reserve Bank of India introduced the Liquidity Adjustment Facility in June 2000 following structural recommendations put forward by the Second Narasimham Committee on Banking Sector Reforms in 1998. Committees like the Chakravarty Committee focused on monetary targeting rather than setting up modern repo-based liquidity management. The Liquidity Adjustment Facility currently operates through repo and reverse repo rates to manage daily systemic liquidity.