The correct answer is option 'C': Discount and Finance House of India (DFHI).

Discount and Finance House of India (DFHI) was established in 1988 by the Reserve Bank of India (RBI) to provide liquidity and further develop secondary market instruments in India. It was set up as a subsidiary of the RBI to promote the development of money markets and provide a platform for trading in money market instruments.

Here is a detailed explanation of DFHI's role and functions:

1. Establishment: DFHI was established with the primary objective of providing liquidity to the money market and promoting the development of secondary market instruments.

2. Owned by RBI: DFHI is a wholly-owned subsidiary of the Reserve Bank of India, which means it operates under the direct supervision and control of the central bank.

3. Development of Secondary Market Instruments: DFHI plays a crucial role in the development of secondary market instruments such as treasury bills, commercial papers, and certificates of deposit. It provides a platform for the trading of these instruments, thereby enhancing their liquidity and enabling efficient price discovery.

4. Money Market Operations: DFHI conducts various money market operations on behalf of the RBI. It actively participates in the market as a buyer and seller of money market instruments to maintain liquidity and stability in the financial system.

5. Trading and Dealing: DFHI acts as a market maker in the money market by providing bid and offer rates for various money market instruments. It facilitates trading and dealing in these instruments, thereby promoting market liquidity and efficiency.

6. Repo and Reverse Repo Operations: DFHI also engages in repo and reverse repo operations, which involve the buying and selling of securities with an agreement to repurchase or resell them at a future date. These operations help in managing short-term liquidity and interest rates in the money market.

7. Role in Monetary Policy Implementation: DFHI's activities are closely aligned with the monetary policy objectives of the RBI. It assists the central bank in implementing its monetary policy by ensuring the availability of liquidity and promoting the efficient functioning of the money market.

In conclusion, the Discount and Finance House of India (DFHI) was established by the Reserve Bank of India to provide liquidity and develop secondary market instruments in India. It plays a vital role in promoting the growth and efficiency of the money market and supports the implementation of monetary policy.