Money Market

Choose the Correct Answer

Correct Answer : Option c

Explanation
Item 1 is correct: Commercial banks actively participate in the money market as both lenders and borrowers. They deal in key instruments such as Call/Notice Money, Treasury Bills (T-bills), Certificates of Deposit (CDs), and Commercial Papers (CPs).
These instruments help banks manage short-term liquidity mismatches.

Item 2 is correct: Non-Banking Finance Companies (NBFCs) are permitted to access the money market for short-term borrowing and investment. They participate in segments such as Call/Notice Money and Commercial Paper markets. While they face regulatory restrictions, they are recognized players in the short-term debt market.

Item 3 is correct: Insurance Companies participate in the money market as investors, deploying surplus funds for liquidity and returns.They commonly invest in T-bills, CDs, and CPs, in line with regulatory investment norms. This helps them maintain short-term solvency ratios while ensuring returns.

Item 4 is correct: The central government participates indirectly in the money market by issuing Treasury Bills.hese T-bills (of 91, 182, and 364 days maturity) are auctioned by the RBI to raise short-term funds.T-bills are a primary instrument of the money market.

Item 5 is not correct: State governments do not directly participate in the money market.They cannot issue Treasury Bills.Their short-term liquidity is managed through Ways and Means Advances (WMA) from the RBI, which is not tradable and thus not part of the money market.