CMA Intermediate · Financial Management and Business Data Analytics · Financial Institutions
In the structure of the Indian financial system, which of the following is classified as a financial instrument rather than a financial institution?
Commercial paper is a financial instrument, a short-term unsecured promissory note issued in the money market. SIDBI, NABARD and LIC are institutions that mobilise and allocate funds, so they belong to the institutional component of the Indian financial system, not the instrument component.
- ACommercial paperCorrect
- BSmall Industries Development Bank of India
- CNational Bank for Agriculture and Rural Development
- DLife Insurance Corporation of India
Explanation
The financial system has four components: institutions, markets, instruments and services. SIDBI, NABARD and LIC are institutions that mobilise and channel funds. Commercial paper is an unsecured money market instrument issued by companies to raise short-term funds, so it is an instrument.
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