Consider the following statements about instruments introduced in the Indian money market after the 1990s: 1. Call Money Market allows borrowing and lending of funds for up to 14 days and is mainly used by banks and mutual funds. 2. Cash Management Bills (CMBs) were introduced to provide the government flexibility in meeting temporary cash flow mismatches. 3. Reverse Repo transactions involve RBI purchasing government securities from commercial banks. Which of the statements given above is/are correct? |ForumIAS

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: D

Notes:

Explanation:

The Call Money Market is an inter-bank market where funds are borrowed and lent for up to 14 days. LIC, GIC, and mutual funds can participate only as lenders.
Cash Management Bills (CMBs) were introduced in August 2009 to allow the government to meet short-term mismatches in cash flow, with maturities less than 91 days.
In Reverse Repo, the RBI sells securities to banks, which effectively means RBI is borrowing from them. The banks purchase government securities, and later, the RBI buys them back.

Source: Indian Economy (Dr. Ramesh Singh)