With reference to 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 transactions.
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?
Explanation
Statement 1 is correct: Commercial Paper (CP) is an unsecured short-term money market debt instrument issued by top-rated corporate entities in the form of a promissory note, with maturities ranging from 7 days up to one year.
Statement 2 is incorrect: A Certificate of Deposit (CD) is a negotiable short-term money market instrument issued by Scheduled Commercial Banks and designated All-India Financial Institutions to depositors, not a long-term instrument issued by the RBI.
Statement 3 is correct: Call Money represents very short-term finance (overnight to 14 days in notice money) utilized exclusively by commercial banks to balance daily reserve ratios (CRR/SLR) through interbank lending.
Statement 4 is incorrect: Zero-Coupon Bonds (such as Treasury Bills) are issued at a deep discount to face value and redeemed at par without periodic coupon payments; they are not interest-bearing bonds.
Hence, statements 1 and 3 are correct — Option C.