Match the LIST-I with LIST-II
| LIST-I | LIST-II |
| (Money Market Instrument) | (Associated keywords) |
| A. Call Money | I. Unsecured, negotiable, short-term instruments in bearer form issued by commercial banks. |
| B. Certificate of deposit | II. Short term borrowing by Govt. of India |
| C. Treasury Bill | III. Unsecured promissory note, negotiable and transferable by endorsement issued by large creditworthy companies. |
| D. Commercial Paper | IV. Short term finance repayable on demand used for inter-bank transactions. |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → A-IV, B-I, C-II, D-III
(A) Call Money — this matches (IV) Short term finance repayable on demand used for inter-bank transactions. Call money exists because every bank must keep a minimum cash reserve with the Reserve Bank. A bank that falls short of that reserve borrows from a bank that has a surplus. The loan runs from one day to a fortnight and is repayable on demand. That reserve requirement is what makes the parties banks and the loan so short.
(B) Certificate of deposit — this matches (I) Unsecured, negotiable, short-term instruments in bearer form issued by commercial banks. This is a bank’s own instrument for raising deposits quickly. Banks use it when the demand for loans is high but deposits are growing slowly. It is in bearer form and negotiable, so the holder can pass it on before it matures.
(C) Treasury Bill — this matches (II) Short term borrowing by Govt. of India. It is issued by the Reserve Bank on the Government’s behalf, which is why the borrowing is the Government’s and not the bank’s. It pays no interest. It is sold at less than its face value and repaid at full face value, and that difference is the investor’s return.
(D) Commercial Paper — this matches (III) Unsecured promissory note, negotiable and transferable by endorsement issued by large creditworthy companies. Only a company of high credit standing can borrow on nothing more than its own promise to pay. That is why only large firms use commercial paper, and they use it for working capital and for bridge financing.
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): “1. Treasury Bill: … 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. …” “2. Commercial Paper: paper is a short-term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period. It is issued by large and creditworthy companies to raise short-term funds at lower rates of interest than market rates. …” “3. Call Money: … term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions. …” “4. Certificate of Deposit: … of deposit (CD) are unsecured, negotiable, short-term instruments in bearer form, issued by commercial banks and development financial institutions. …” |