Currently, the banking sector in the Indian economy is facing lots of problems. The rates of
interest that banks are paying on deposits have sharply decreased; as a result banks are able
to collect lesser amounts of deposits.
Due to the policies of the Reserve Bank of India, lending rates have also decreased. The
automobile industry is also facing a lot of problems and thus they have also reduced the
prices of cars. This has encouraged people to take car loans from banks as the interest rates
on loans, along with prices of cars in the automobile sector are declining.
Due to this position of tight liquidity, ‘The Oberoi Bank Ltd.’ decided to raise funds by issuing
an unsecured, short-term instrument which could be purchased by corporations, companies
and individuals.
(a) Identify and explain the money market instrument used by ‘The Oberoi Bank Ltd.’ to raise
funds.
(b) Also explain the money market instrument used by the banks to maintain Cash Reserve
Ratio.
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