Question 1

What is the maximum maturity period for instruments traded in the Money Market?

Accepted Answer

One year. The money market deals with short-term financial instruments. These instruments typically have a maturity period of up to one year. Capital markets, by contrast, deal with long-term debt and equity.

Question 2

Which of the following is the primary regulator of the Money Market in India?

Accepted Answer

RBI. The Reserve Bank of India regulates the activities and participants of the money market. It ensures liquidity and stability within the financial system. SEBI primarily regulates the capital and securities market.

Question 3

What is 'Call Money' in the context of banking?

Accepted Answer

Overnight loan. Call money refers to borrowing or lending funds for a period of exactly one day. It is used by commercial banks to maintain their cash reserve ratio requirements. If the loan is for 2 to 14 days, it is known as notice money.

Question 4

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

Accepted Answer

Central Government. Treasury Bills are short-term debt instruments issued by the Government of India. They are used to meet the government's short-term liquidity requirements. They are considered risk-free as they are backed by a sovereign guarantee.

Question 5

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

Accepted Answer

Rs. 5 Lakhs. Certificates of Deposit must be issued for a minimum amount of Rs. 5 lakhs. They are negotiable money market instruments issued by scheduled commercial banks. They are issued in dematerialized form or as a usable promissory note.

Banking Terms — Set 1