With reference to the Indian economy, consider the following statements:
- ‘Commercial Paper’ is a short-term unsecured promissory note.
- ‘Certificate of Deposit’ is a long-term instrument issued by the Reserve Bank of India to a corporation.
- ‘Call Money’ is a short-term finance used for interbank transactions.
- ‘Zero-Coupon Bonds’ are the interest bearing short-term bonds issued by the Scheduled Commercial Banks to corporations.
Which of the statements given above is/are correct?
[UPSC Civil Services Exam – 2020 Prelims]
(a) 1 and 2 only
(b) 4 only
(c) 1 and 3 only
(d) 2, 3 and 4 only
Short term financial instruments are –
- Call money
- Treasury Bill
- Commercial Paper
- Deposit Certificates
- Trade bill
- Hence 1 is true and 2 is false.
Long term financial instruments are-
- Security Market- Equity, Debt, IPOs, Commodity Markets etc. Hence 4 is incorrect.
- Non-Securit Market – Mutual Funds, Fixed Deposits, Saving Deposits etc.
Call money deals with day to day cash requirement of banks. Its is a short-term financial instrument. Hence 3 is correct.