Practicing Success
The method by which banks borrow from each other to be able to maintain the cash reserve ratio : |
Treasury Bill Commercial Paper Call Money Commercial Bill |
Call Money |
The correct answer is option (3) : Call Money The method by which banks borrow from each other to be able to maintain the cash reserve ratio is called "Call Money". It is a short-term finance option where funds are borrowed or lent on a daily basis. It is usually used by banks and financial institutions to meet their short-term liquidity needs. 1. Treasury Bill: It is a short-term debt instrument issued by the government to raise funds for a period of less than one year. It is considered a safe investment option as it is backed by the government and has a fixed rate of return. 2. Commercial Paper: It is an unsecured, short-term debt instrument issued by companies to raise funds for a period of up to one year. It is usually issued by companies with a high credit rating and is considered a safe investment option. 4. Commercial Bill: It is a short-term debt instrument issued by companies to raise funds for a period of up to 180 days. It is usually issued by companies with a high credit rating and is considered a safe investment option. |