Assertion: Certificates of deposit (CD) are unsecured, negotiable, Long-term instruments in bearer form, issued by commercial banks and development financial institutions.
Reasoning: Certificate of deposit 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.
Answer & explanation
Correct answer: option 4
The correct answer is Option 4: Assertion (A) is not true but Reasoning (R) is correct.
Assertion: Certificates of deposit (CD) are unsecured, negotiable, long-term instruments in bearer form, issued by commercial banks and development financial institutions. This is incorrect. Certificates of deposit (CD) are unsecured, negotiable, short-term instruments (NOT LONG TERM AS MENTIONED in assertion) in bearer form, issued by commercial banks and development financial institutions.
Reasoning: Certificate of deposit 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. This is correct. 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.