Which money market instrument is used for inter bank transactions ?

Commercial paper

The correct answer is option (1) : Commercial paper

The money market instrument used for interbank transactions is "Call Money" or "Call Loans."

Call money refers to short-term funds borrowed or lent by banks among themselves in the money market to manage their day-to-day liquidity needs. It is typically an unsecured interbank lending transaction with a very Short maturity, often overnight or for a very short period.

Commercial Paper: Commercial paper is a short-term debt instrument issued by corporations to raise funds for their short-term financing needs. It is typically not used for interbank transactions.

Treasury Bill: Treasury bills (T-bills) are short-term government securities issued to raise funds for the government. They are primarily used for investment purposes rather than interbank transactions.

Certificate of Deposit (CD): Certificates of Deposit are time deposits offered by banks to customers for a fixed term with a specified interest rate. They are not typically used for interbank transactions but serve as a savings and investment instrument for individuals and businesses.

So, the correct answer is (4) Call money.