The capital market consists of a series of channels through which the savings of the community are made available for ________.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → industrial and commercial enterprises and for the public in general
Option (1) the Central Government to meet its short-term requirement of funds — Incorrect. This is the purpose of a Treasury bill. It is a money market instrument for short-term needs.
Option (2) industrial and commercial enterprises and for the public in general — Correct. The capital market is where long-term funds, both debt and equity, are raised and invested. Its channels carry the savings of the community to industrial and commercial enterprises and to the public.
Option (3) commercial banks to maintain their cash reserve ratio — Incorrect. Banks borrow from each other for this through call money, a money market instrument.
Option (4) business firms to meet the temporary shortages of cash and obligations — Incorrect. Meeting temporary shortages of cash is the work of the money market, which deals in funds for up to one year.
NCERT (Pre-rationalised Edition): “Capital Market The term capital market refers to facilities and institutional arrangements through which long-term funds, both debt and equity are raised and invested. It consists of a series of channels through which savings of the community are made available for industrial and commercial enterprises and for the public in general. It directs these savings into their most productive use leading to growth and development of the economy. The capital market consists of development banks, commercial banks and stock exchanges.” |