NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to the Indian Financial Markets
In the Indian financial system, which of the following best describes the primary function of the money market?
The money market provides short-term funds and liquidity through instruments with maturity up to one year, such as treasury bills, commercial paper and certificates of deposit. Long-term equity and bonds are capital market instruments, so they do not describe the money market's function.
- ARaising long-term equity capital for infrastructure projects
- BProviding short-term funds and liquidity, generally for instruments with maturity up to one yearCorrect
- CTrading in commodity futures contracts
- DIssuing long-term government bonds with maturity above 10 years
Explanation
The money market deals in short-term debt instruments such as treasury bills, commercial paper, certificates of deposit and call money, with maturity up to one year. Long-term equity and bonds belong to the capital market, and commodity futures trade on commodity derivatives exchanges.
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