Mr. Rehan has done a diploma in Financial market and its participants. Recently he got a chance to present his knowledge and train students in a school. He told students about various money market instruments. He mentioned about an instrument which is issued by R.B.I on behalf of Central Government. He told students that Banks use a system to borrow money (an instrument) to manage their CRR i.e Cash Reserve Ratio. Later. he mentioned a short term self liquidating instrument like Bills of Exchange that can be used for arranging working capital. He also told students about an instrument that helps to mobilise large amounts of money in short period by commercial banks. Lastly, Mr. Rehan spoke about an instrument that works as a replacement towards bank borrowing for large credit-worthy companies, its maturity period is 15 days to one year.

"An instrument that helps to mobilise large amounts of money in short period by commercial banks".

Identify the money market instrument stated above :

Certificate of Deposit

The correct answer is option (1) : Certificate of Deposit

1 . Certificate of Deposit

As mentioned in the given statement, the instrument that helps to mobilize large amounts of money in a short period by commercial banks is Certificate of Deposit (CD). CDs are a type of money market instrument issued by banks and financial institutions to raise short-term funds. They are usually issued in denominations of Rs. 1 lakh or more and have a maturity period ranging from 7 days to I year. CDs are a popular investment option for individuals and institutions looking for a safe and secure way to earn a fixed rate of return on their surplus funds.

2. Call Money

Call money is a type of money market instrument where funds are borrowed or lent on a daily basis between banks and other financial institutions and is usually unsecured. The interest rate on call money is determined by market forces and can fluctuate frequently.

3. Commercial bills :

Commercial bills are a type of short-term self-liquidating instrument like Bills of Exchange that can be used for arranging working capital. They are used for short-term financing and are self-liquidating in nature. Commercial bills are usually issued by companies and are backed by he creditworthiness of the company.

4. Treasury bills :

Treasury bills are a type of money market instrument issued by the government to raise short-term funds. They are issued at a discount to face value. Treasury bills are considered to be one of the safest investments as they are backed by the creditworthiness of the government