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Q40 (IAS/2024) Economy › Money, Banking & Inflation › Money market instruments Official Key

With reference to the Indian economy, "Collateral Borrowing and Lending Obligations" are the instruments of :

Result
Your answer: —  ·  Correct: C
Explanation

Collateralized Borrowing and Lending Obligations (CBLO) are money market instruments[1], which are part of the financial market segment dealing with short-term debt securities.

The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities (less than one year) are traded[1]. Money market instruments are basically debt instruments and include Call/Notice money, Repos, Treasury Bills, Cash Management Bills, Commercial Paper, Certificate of Deposits and Collateralized Borrowing and Lending Obligations (CBLO)[1].

CBLO is specifically designed for short-term borrowing and lending operations among financial institutions and is not used in bond markets (long-term), forex markets (currency trading), or stock markets (equity trading). Therefore, option C (Money market) is the correct answer.

Sources
  1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.7 Financial Markets > p. 50
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Q. With reference to the Indian economy, "Collateral Borrowing and Lending Obligations" are the instruments of : [A] Bond market [B] Forex…
At a glance
Origin: From standard books Fairness: High fairness Books / CA: 10/10 · 0/10
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This is a textbook 'Sitter'. It validates the strategy of memorizing the taxonomy of financial markets. If you simply listed the instruments under 'Money Market' vs 'Capital Market' in your notes, this was a 5-second kill.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
In the context of the Indian economy, which market uses Collateral Borrowing and Lending Obligations (CBLO) as instruments?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.7 Financial Markets > p. 50
Presence: 5/5
“Money Market: A segment of the financial market in which financial instruments with high liquidity and very short maturities (less than one year) are traded. Money market instruments are basically debt instruments and include Call/Notice money, Repos, Treasury Bills, Cash Management Bills, Commercial Paper, Certificate of Deposits and Collateralized Borrowing and Lending Obligations (CBLO). The players who can trade in the money market are financial institutions, commercial banks, central banks and highly rated corporates. These markets are less risky. Money Market transactions can also be classified as primary and secondary. • Call/Notice Money: In call money, funds are transacted for overnight basis and under notice money; funds are transacted for the period between 2 days and 14”
Why this source?
  • Explicitly lists Collateralized Borrowing and Lending Obligations (CBLO) among money market instruments.
  • Defines the money market as the segment where high-liquidity, very short-maturity (less than one year) debt instruments are traded, directly situating CBLO within that market.
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