New 👉 Ask your RBI Grade B 2025 Preparation Queries Here!!

    Question

    I n the Indian money market, _____ ( i ) is an

    instrument that provides short-term liquidity to the banking system, whereas _____ ( ii) are unsecured, short-term promissory notes issued by large corporations. The _____ ( iii) is an overnight borrowing and lending instrument used between banks and RBI to manage liquidity.   Choose the correct set of words for ( i ), (ii), and (iii) from the options below:  
    A Call Money, Commercial Papers, Repo Rate Correct Answer Incorrect Answer
    B Treasury Bills, Certificate of Deposit, Reverse Repo Rate Correct Answer Incorrect Answer
    C Call Money, Certificate of Deposit, Treasury Bills Correct Answer Incorrect Answer
    D Treasury Bills, Commercial Papers, Call Money Correct Answer Incorrect Answer
    E Commercial Papers, Call Money, Repo Rate Correct Answer Incorrect Answer

    Solution

    Explanation:  

    • Call Money ( i ) : Banks borrow and lend funds for a very short period, typically one day, to manage liquidity.  
    • Commercial Papers (ii) : These are unsecured short-term promissory notes issued by corporations to raise funds.  
    • Repo Rate (iii) : This is the rate at which RBI lends money to commercial banks for very short durations.  

    Practice Next