Question

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​

Answer 1

Answer:

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