Match List-I with List-II
| List-I | List-II |
| (Money Market Instruments) | (Associated keywords) |
| (A) Treasury Bill | (I) An instrument used by the companies for bridge financing |
| (B) Commercial Paper | (II) Zero coupon bond |
| (C) Call Money | (III) Used for inter-bank transactions to maintain cash reserve ratio |
| (D) Certificate of Deposit | (IV) Used during periods of tight liquidity |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A) - (II), (B) - (I), (C) - (III), (D) - (IV)
(A) Treasury Bill — this matches (II) Zero coupon bond. A treasury bill is issued at a discount and repaid at its full value. No interest (coupon) is paid; the difference is the investor’s return.
(B) Commercial Paper — this matches (I) An instrument used by the companies for bridge financing. A company raises short-term money through commercial paper to meet costs, such as the costs of an issue, while it waits for long-term funds. Short-term money that bridges this gap is bridge financing.
(C) Call Money — this matches (III) Used for inter-bank transactions to maintain cash reserve ratio. Banks lend call money to one another for very short periods so that each can keep the cash reserve ratio the RBI requires.
(D) Certificate of Deposit — this matches (IV) Used during periods of tight liquidity. Banks issue certificates of deposit when deposits grow slowly but the demand for loans is high.
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: … 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: … For example companies use this instrument for purposes such as bridge financing.” “3. Call Money: … Call money is a method by which banks borrow from each other to be able to maintain the cash reserve ratio. …” “4. Certificate of Deposit: … 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. …” |