Question 32 of 32
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Explain any five examples of credit instruments of the money market.
Maharashtra MsbshseMaharashtra HSC (MSBSHSE) Board 2020Subjective· 5mImportance★★★★★
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Start your 14-day free trial to unlock the full solution →Five money-market credit instruments are call money, treasury bills, commercial paper, certificate of deposit and commercial bills, all used for short-term borrowing and lending.
The money market is the market for short-term funds, usually for periods of up to one year. It uses several credit instruments to move funds between those who have surplus money and those who need it for a short time. Five important instruments are:
- Call money: Very short-term funds borrowed and lent, mainly between banks, for one day (call) or a few days (notice money) up to 14 days. It helps banks meet their day-to-day cash requirements. The interest paid is called the call rate.
- Treasury bills (T-bills): Short-term instruments issued by the Reserve Bank of India on behalf of the Central Government to borrow money for periods like 91, 182 or 364 days. They are issued at a discount and repaid at face value; they are safe as they are government-backed.
- Commercial paper (CP): An unsecured, short-term promissory note issued by large, financially sound companies to raise funds for a few months. It is issued at a discount to face value and is transferable. …
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