Indian Economy·Prelims Strategy

Liquidity Management — Prelims Strategy

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Version 1Updated 5 Mar 2026

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Prelims Strategy

For Prelims preparation, focus on memorizing specific operational details of each liquidity management tool including rates, timings, and eligibility criteria. Create comparison charts for LAF vs MSF vs SDF highlighting key differences in collateral requirements, timing, and rates.

Memorize current CRR (4%) and SLR (18%) rates along with their calculation basis (NDTL). Pay special attention to recent innovations like SDF introduction date (April 2022) and its operational differences from reverse repo.

Practice questions on COVID-19 measures with specific amounts - LTRO (₹1 lakh crores), CRR reduction (100 bps releasing ₹1.37 lakh crores). Focus on elimination techniques by understanding the fundamental purpose of each tool - LAF for routine operations, MSF for emergency, OMO for permanent changes, SDF for surplus absorption.

Common traps include confusing operational timings (LAF: 9 AM-3:30 PM, MSF: 7-7:30 PM), collateral requirements (LAF and MSF need collateral, SDF doesn't), and calculation periods (CRR: fortnightly average, not daily).

Create mnemonics for remembering multiple tools and their characteristics.