Name the money market investment used by Commercial banks to meet their Cash Reserve Ratio requirement.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Call Money
Option (1) Certificates of Deposit — Incorrect. CDs are unsecured, negotiable short-term instruments issued by commercial banks and development financial institutions. They are not used to meet the CRR requirement.
Option (2) Call Money — Correct. Commercial banks must maintain a minimum cash balance known as the cash reserve ratio. Call money is the method by which banks borrow from each other to be able to maintain it.
Option (3) Commercial Papers — Incorrect. Commercial paper is issued by large and creditworthy companies to raise short-term funds, not by banks to meet CRR.
Option (4) Commercial Bills — Incorrect. A commercial bill is used to finance the credit sales of business firms, not the CRR requirement of banks.
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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