With reference of the Indian economy, consider the following statements:
1. ‘Commercial Paper’ is a short-term unsecured promissory note.
2. ‘Certificate of Deposit’ is a long-term instrument issued by the Reserve Bank of India to a corporation.
3. ‘Call Money’ is a short-term finance used for interbank transitions.
4. ‘Zero-Coupon Bonds’ are the interest bearing short-term bonds issued by the Scheduled Commercial Banks to corporations.
Which of the statements given above is/are correct?
The following statements are correct concerning the Indian economy: - Commercial Paper is a short-term unsecured promissory note. It's a money market instrument issued by companies to raise short-term funds.
- Call Money is a short-term finance used for interbank transactions. Banks borrow or lend money from each other for overnight periods to meet their liquidity requirements. Incorrect statements: - Certificate of Deposit is not issued by the Reserve Bank of India. It's a negotiable instrument issued by commercial banks to depositors for a fixed maturity period at a predetermined interest rate.
- Zero-Coupon Bonds can be long-term or short-term, but they are not issued by Scheduled Commercial Banks. These bonds don't pay periodic interest, but are sold at a discount to their face value. The difference between the purchase price and the maturity value represents the return on investment. Therefore, the correct codes are 1 and 3 only.