- Statement 1: 'Commercial Paper' is indeed a short- term (typically 7 days to one year) unsecured promissory note issued by highly-rated corporations to raise funds from the money market. This statement is correct. - Statement 2: 'Certificate of Deposit' (CD) is a marketable receipt for funds deposited in a bank for a specified period (minimum 7 days). It is issued by commercial banks and financial institutions, not the Reserve Bank of India, and can be short to medium-term, not exclusively long-term. This statement is incorrect. - Statement 3: 'Call Money' is a short-term finance (usually overnight) used in the interbank market for lending and borrowing funds to manage liquidity. This statement is correct. - Statement 4: 'Zero-Coupon Bonds' do not pay periodic interest (coupon). They are sold at a discount to their face value, and the difference between the face value and the purchase price represents the investor's return. They are not characterized as "interest bearing" in the traditional sense and can be issued by various entities (government, corporations, banks), not just Scheduled Commercial Banks to corporations. This statement is incorrect.
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 ?
Asked in UPSC IAS 2020 · Topic: Money & Banking (Financial Markets: Money Market and Capital Market (Components, Instruments, Role))
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