Question 1

What is the maximum maturity period for an instrument to be traded in the Money Market?

Accepted Answer

One year. The money market deals with short-term financial instruments. These instruments typically have a maturity of up to one year. This differentiates the money market from the capital market which deals with long-term funds.

Question 2

Which of the following refers to borrowing and lending of funds for a period of exactly one day?

Accepted Answer

Call Money. Call money is a short-term loan that is repaid on demand and has a maturity of one day. It is used by commercial banks to maintain their cash reserve ratio. Banks borrow from each other in this market to meet temporary liquidity shortages.

Question 3

What is the duration of 'Notice Money' in the Indian money market?

Accepted Answer

2 to 14 days. Notice money involves the borrowing and lending of funds for a period between 2 to 14 days. Unlike call money, it does not require immediate repayment the next day. It is a key component of the inter-bank call money market.

Question 4

Treasury Bills (T-Bills) are issued by the RBI on behalf of which entity?

Accepted Answer

Central Government. Treasury Bills are short-term debt instruments used by the Central Government to meet its fiscal needs. They are issued in three tenures: 91 days, 182 days, and 364 days. They are considered risk-free as they are backed by the sovereign guarantee.

Question 5

What is the minimum amount for which a Certificate of Deposit (CD) can be issued?

Accepted Answer

Rs. 5 Lakhs. A Certificate of Deposit is a negotiable money market instrument issued in dematerialized form. It must be issued for a minimum amount of Rs. 5 lakhs. It is typically issued by scheduled commercial banks and select financial institutions.

Money Market — Set 1