Q.The maximum duration of commercial paper is
(A) 3 months
(B) 6 months
(C) 12 months
(D) 24 months

The Reserve Bank of India (RBI), as the central bank, controls and regulates the Indian money market, where short-term funds are borrowed and lent.

The RBI manages the money market through its monetary policy — the bank rate, repo rate, cash reserve ratio and open-market operations — to regulate the supply and cost of short-term …

A securities market with maturity of one year or less is the money market.

The money market is the segment of the financial market that deals in short-term instruments (treasury bills, commercial paper, certificates of deposit, call money) with a maturity of up to one year. The capital market deals in long-term securities (over one ye …

The term asked is monetary policy.

Monetary policy is the policy framed and operated by a country's central bank (the Reserve Bank of India, in our case) to control and regulate the supply of money, the availability of credit and the cost of credit (interest rates) in the economy. Tools such as the bank rate, repo and reverse-repo rates, cash reserve ratio (CRR) and statutory liquidity ratio (SLR) are used to influence how much currency and credit circulate, so as to manage inflation, growth and stability.

…

The maximum maturity of commercial paper is 12 months (one year).

Commercial paper is a short-term, unsecured promissory note issued by large, creditworthy companies to raise working-capital funds. Its maturity period runs from a minimum of a few days up to a maximum of one y …

A Certificate of Deposit has a minimum term of 15 days and a maximum term of 365 days (one year).

A Certificate of Deposit (CD) is a negotiable money-market instrument issued by commercial banks against funds deposited for a fixed period. In the syllabus framework tested here, its maturity runs from a minimum of 15 days up to a maximum of one y …

The correct option is (b) Reserve Bank of India. T-Bills are issued by the RBI on the government's behalf to meet short-term funding needs.

• (a) State Bank of India and (c) Central Bank of India are commercial banks, not the issuing authority.
• (d) Financial Institutions do not issue T-Bills. …

Monetary policy is controlled by the Reserve Bank of India.

Monetary policy is the use of instruments like the repo rate, cash reserve ratio and open-market operations to regulate the supply of money and credit in the economy. In India this is the responsibility of the Reserve Bank of India, the central bank.

• (a) Central Government handles fiscal policy (taxation and spending), not monetary policy. …

Bank overdraft, trade credit and cash credit are short-term sources, but a preference share is long-term capital, so option (d) is the odd one out.

Working capital is the finance a business needs for its day-to-day operations, and short-term working capital is normally met from sources that mature within a year:

• Bank overdraft — a bank lets the firm overdraw its current account up to a limit (short-term).
• Trade credit — suppliers allow a short credit period before payment (short-term). …

Cash credit, overdraft and trade credit mature within a year (short-term) while debentures are long-term, so option (d) is the exception.

Short-term credit is finance that is used for current/operating needs and is repayable within a short period, usually up to one year:

• Cash credit — short-term bank borrowing against stock/receivables.
• Overdraft — short-term facility to overdraw a current account.
• Trade credit — short credit period granted by suppliers. …

Debenture holders are creditors who receive a fixed interest, so the term is 'interest'.

A debenture is an instrument acknowledging a debt owed by the company. Its holder is a creditor, not an owner, and is entitled to a fixed rate of return payable regularly whether or not the company makes …

Treasury Bills raise short-term funds — option (a).

Treasury Bills (T-Bills) are short-term money-market instruments issued by the Reserve Bank of India on behalf of the Central Government for periods of 91, 182 or 364 days (all under one year). They are issued at a discount and redeemed at face value, and are used to meet the government's short-term liquidity …