Indian Economy Quiz: Capital Markets & Money Markets | 16 July, 2021

10/10

learnings
1.Treasury Bills (TBs): This instrument of the money market though present since Independence got organised only in 1986. They are used by the Central Government to fulfill its short-term liquidity requirement up-to the period of 364 days. There developed five types of the TBs in due course of time:

14-day (Intermediate TBs)
14-day (Actionable TBs)
91-day TBs
182-day TBs
364-day TBs
Out of the above five variants of the TBs, at present only the 91-day TBs, 182-day TBs and the 364-day TBs are issued by the government. The other two variants were discontinued in 2001.
2.Market Stabilisation Scheme or MSS is a tool used by the Reserve Bank of India to suck out excess liquidity from the market through issue of securities like Treasury Bills, Dated Securities etc. on behalf of the government.

The money raised under MSS is kept in a separate account called MSS Account and not parked in the government account or utilized to fund its expenditures.
The Reserve Bank under Governor YV Reddy initiated the MSS scheme in 2004, to control the surge of US dollars in the Indian market; RBI started buying US dollars while pumping in rupee.
This eventually led to over-supply of the domestic currency raising inflationary expectations. MSS was introduced to mop up this excess liquidity.
3.Currency Swap Arrangement is an arrangement, between two friendly countries, which have regular, substantial or increasing trade, to basically involve in trading in their own local currencies, where both pay for import and export trade, at the pre-determined rates of exchange, without bringing in third country currency like the US Dollar.

In such arrangements no third country currency is involved, thereby eliminating the need to worry about exchange variations.
The swap arrangement (in 2018) is an agreement between India and Japan to essentially exchange and re-exchange a maximum amount of USD 75 Billion for domestic currency, for the purpose of maintaining an appropriate level of balance of payments for meeting short-term deficiency in foreign exchange.

6/9

Results
8 of 10 questions answered correctly

Your time: 00:06:08

7 of 10 questions answered correctly

Your time: 00:02:21

5/9

Results
7 of 10 questions answered correctly

Your time: 00:04:06