Which of the followings are correct in case of money market in India? A. Commercial bill is a…
Evaluating each statement regarding the money market in India: - Statement A is false: A commercial bill is a short-term, self-liquidating negotiable instrument with…
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Which of the followings are correct in case of money market in India?
A. Commercial bill is a short-term instrument with high risk
B. Treasury bill is an instrument of short-term borrowing by the government with absence of default risk
C. RBI uses refinance to relieve liquidity shortages in the system
D. The RBI has switched over from daily fixed rate repos auction system to discriminatory price auction repos.
E. SLR enables to impose secondary and supplementary reserve requirements on the banking system.
Answer and explanation
Correct answer C
Evaluating each statement regarding the money market in India: - Statement A is false: A commercial bill is a short-term, self-liquidating negotiable instrument with relatively low default risk. - Statement B is true: Treasury bills (T-bills) are short-term money market instruments issued by the Government of India and carry zero default risk. - Statement C is true: The Reserve Bank of India (RBI) provides refinance facilities to commercial banks and financial institutions to relieve temporary liquidity shortages. - Statement D is false: Under the Liquidity Adjustment Facility (LAF) reform, the RBI transitioned from discriminatory price repo auctions to a daily fixed-rate repo system (alongside variable-rate term repos under later frameworks). - Statement E is true: The Statutory Liquidity Ratio (SLR) acts as a secondary and supplementary reserve requirement on the banking system alongside the Cash Reserve Ratio (CRR). Therefore, Statements B, C, and E are correct .
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UGC NET Economics