Money Market — Set 8
Economics · मुद्रा बाजार · Questions 71–80 of 80
Indigenous bankers and local moneylenders are part of the?
Correct Answer: B. Unorganized Money Market
Indigenous bankers and moneylenders form the unorganized segment of the Indian money market. They are not directly regulated by the RBI. They usually operate in rural and semi-urban areas.
Commercial Paper (CP) was first introduced in India in which year?
Correct Answer: D. 1990
Commercial Paper (CP) was introduced in India in 1990. It was intended to enable highly rated corporate borrowers to diversify their short-term borrowing. It is issued in the form of a promissory note.
Which of the following is NOT a money market instrument?
Correct Answer: B. Shares and Debentures
Shares and debentures are instruments of the capital market because they are for long-term investment. Money market instruments are always short-term. T-Bills, CPs, and CDs are all short-term debt instruments.
Treasury Bills in India are currently issued in how many standard tenors?
Correct Answer: D. Three
India currently issues Treasury Bills in three standard tenors: 91 days, 182 days, and 364 days. These are auctioned regularly by the RBI. They are zero-coupon instruments issued at a discount.
The Discount and Finance House of India (DFHI) was established primarily to?
Correct Answer: C. Provide liquidity to money market instruments
The DFHI was set up to develop a secondary market for money market instruments. It provides liquidity by buying and selling these instruments. This helps in the smooth functioning of the short-term credit market.
When RBI wants to decrease the money supply in the economy, it usually?
Correct Answer: A. Increases Repo rate
Increasing the Repo rate makes borrowing from the RBI more expensive for banks. Banks then increase their lending rates, which reduces the overall demand for credit. This helps in controlling inflation and the money supply.
What is the minimum amount for issuing a Commercial Paper (CP) in India?
Correct Answer: A. Rs. 5 Lakh
Commercial Paper is issued in denominations of Rs. 5 lakh or multiples thereof. This makes it a wholesale market instrument. It is generally purchased by banks, mutual funds, and large companies.
Which instrument is a short-term negotiable obligation of a bank that can be traded in the secondary market?
Correct Answer: B. Certificate of Deposit
A Certificate of Deposit (CD) is a negotiable money market instrument. Unlike a fixed deposit, it can be sold in the secondary market before maturity. This provides greater flexibility to large investors.
Ways and Means Advances (WMA) are provided by the RBI to?
Correct Answer: D. The Government
WMA is a temporary loan facility provided by the RBI to the Central and State governments. It helps them meet temporary mismatches in receipts and payments. It is not a long-term borrowing but a short-term credit line.
In the money market, 'Term Money' refers to funds borrowed for a period of?
Correct Answer: A. More than 14 days up to one year
Term money describes funds lent or borrowed for a period between 15 days and one year. It is one of the components of the inter-bank market. The interest rates for term money are generally higher than for call money.