The short term instrument issued by the Reserve Bank of India is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Zero Coupon Bond
Option (1) Certificate of Deposit — Incorrect. It is issued by commercial banks and development finance institutions, not by the Reserve Bank of India.
Option (2) Commercial Paper — Incorrect. It is issued by large companies with a good credit record.
Option (3) Zero Coupon Bond — Correct. A Treasury bill is a short-term borrowing of the Government of India, for less than one year. The Reserve Bank of India issues it on behalf of the government. It is also known as a zero coupon bond, because it pays no interest (coupon). It is issued at a price below its face value and repaid at face value, and the difference is the investor’s return.
Option (4) Commercial Bill — Incorrect. It is a bill of exchange drawn by a business firm on its buyer, not an RBI instrument.
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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