Q. Consider the following statements regarding the Indian Money Market:
1.The discount rate in the money market is guided by the repo rate announced by the RBI.
2.Money market instruments typically have a maturity period exceeding one year.
3.Borrowings in the money market are always backed by collateral.
Which of the statements given above is/are correct?

[A] 1 only

[B] 1 and 2 only

[C] 2 and 3 only

[D] 1, 2 and 3

Answer: A
Notes:

Explanation:

  • The repo rate announced by the RBI guides the discount rate in the money market.
  • Money market instruments are for short-term needs, with maturities up to 364 days.
  • Borrowings may or may not be backed by collateral.

Source: Indian Economy (Dr. Ramesh Singh) 

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