Choose the incorrect statements from the following:
(A) Treasury bills are issued by the Reserve Bank of India on behalf of the Central Government.
(B) Certificates of deposit are issued by non-banking finance companies.
(C) A trade bill can be discounted with a bank if the seller needs funds before the bill matures.
(D) A commercial bill is drawn by the buyer of the goods.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (B) and (D) only
(A) Treasury bills are issued by the Reserve Bank of India on behalf of the Central Government. — Correct statement. The bills meet the short-term need for funds of the Central Government.
(B) Certificates of deposit are issued by non-banking finance companies. — Incorrect statement. Certificates of deposit are issued by commercial banks and development financial institutions.
(C) A trade bill can be discounted with a bank if the seller needs funds before the bill matures. — Correct statement. Discounting lets the seller get cash before the due date.
(D) A commercial bill is drawn by the buyer of the goods. — Incorrect statement. The seller (drawer) draws the bill and the buyer (drawee) accepts it.
NCERT (Pre-rationalised Edition): “1. Treasury Bill: A Treasury bill is basically an instrument of short-term borrowing by the Government of India maturing in less than one year. They are also known as Zero Coupon Bonds issued by the Reserve Bank of India on behalf of the Central Government to meet its short-term requirement of funds. …” “4. Certificate of Deposit: Certificates of deposit (CD) are unsecured, negotiable, short-term instruments in bearer form, issued by commercial banks and development financial institutions. They can be issued to individuals, corporations and companies during periods of tight liquidity when the deposit growth of banks is slow but the demand for credit is high. They help to mobilise a large amount of money for short periods.” “5. Commercial Bill: A commercial bill is a bill of exchange used to finance the working capital requirements of business firms. It is a short-term, negotiable, self-liquidating instrument which is used to finance the credit sales of firms. When goods are sold on credit, the buyer becomes liable to make payment on a specific date in future. The seller could wait till the specified date or make use of a bill of exchange. The seller (drawer) of the goods draws the bill and the buyer (drawee) accepts it. On being accepted, the bill becomes a marketable instrument and is called a trade bill. These bills can be discounted with a bank if the seller needs funds before the bill matures. When a trade bill is accepted by a commercial bank it is known as a commercial bill.” |