The following is not an important function of the Financial Market:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Not providing liquidity to financial assets.
Option (1) Mobilisation of savings and channeling them into the most productive uses. — A function of the financial market (Incorrect). It brings the savings of households to the businesses that can put them to the best use.
Option (2) Not providing liquidity to financial assets. — Not a function of the financial market (Correct). The real function is the opposite: the market provides liquidity. Because shares and bonds can be bought and sold easily in it, they can be turned into cash whenever the holder needs.
Option (3) Reducing the cost of transactions. — A function of the financial market (Incorrect). It gives buyers and sellers ready information about securities, which saves them time, effort and money.
Option (4) Facilitating price discovery. — A function of the financial market (Incorrect). The price of a security is set by the demand and supply of funds among the many buyers and sellers in the market.
Note: Although the chapter ‘Financial Markets’ was dropped from the NCERT textbooks during rationalisation, it has stayed in the NTA syllabus every year since 2022, except for 2025, and it is part of the syllabus again from 2026. This question is therefore based on the pre-rationalised NCERT, an extract from which is given below.
NCERT (Pre-rationalised Edition):
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