Money Market — Set 7
Economics · मुद्रा बाजार · Questions 61–70 of 80
Which of the following is a safe money market instrument issued by the government?
Correct Answer: C. Treasury Bill
Treasury Bills (T-Bills) are issued by the Government of India and are considered highly safe. They carry no risk of default because they are backed by the government. They are used to meet short-term revenue-expenditure gaps.
Call money refers to the borrowing and lending of funds for a period of?
Correct Answer: B. One day
Call money is inter-bank lending and borrowing for exactly one day. It helps banks adjust their temporary liquidity mismatches. If the funds are for 2 to 14 days, it is called Notice Money.
What is the maximum maturity period of a Commercial Paper?
Correct Answer: C. 1 year
Commercial Paper (CP) can be issued for a maximum period of 364 days or one year. It is an unsecured promissory note used by large corporations. This allows them to raise short-term working capital from the market.
Which bank or institution regulates the organized money market in India?
Correct Answer: C. RBI
The Reserve Bank of India (RBI) is the supreme regulator of the organized money market. It uses tools like Repo and Reverse Repo to manage liquidity. Organized participants include banks and financial institutions.
A Certificate of Deposit (CD) is primarily issued by?
Correct Answer: C. Commercial Banks
Certificates of Deposit (CDs) are issued by commercial banks and some financial institutions. They are negotiable instruments representing funds deposited for a fixed period. They are often issued when bank liquidity is tight.
Which instrument is used to manage temporary cash flow mismatches of the Government of India for less than 91 days?
Correct Answer: D. Cash Management Bill
Cash Management Bills (CMBs) were introduced in 2010 for very short-term government needs. They have a maturity period of less than 91 days. They are otherwise similar to Treasury Bills in nature.
What is the minimum maturity period for a Certificate of Deposit issued by a bank?
Correct Answer: C. 7 days
The minimum maturity for a Certificate of Deposit issued by a bank is 7 days. The maximum maturity for bank-issued CDs is one year. This helps banks manage their short-term deposit portfolio.
The 'Money Market' is a market for which type of funds?
Correct Answer: D. Short-term funds
The money market is exclusively for short-term funds, usually up to one year. It provides liquidity to the banking and corporate sectors. Long-term funds are the domain of the Capital Market.
Repo rate is the rate at which?
Correct Answer: C. Banks borrow from RBI
The Repo rate is the interest rate at which commercial banks borrow money from the RBI. This borrowing is done by selling government securities with an agreement to buy them back. It is a key tool for controlling inflation.
Notice Money refers to funds borrowed or lent for a period of?
Correct Answer: C. 2 to 14 days
Notice Money is short-term borrowing between banks for a period of 2 to 14 days. It is part of the inter-bank money market. If the period is exactly one day, it is called Call Money.