Economics • Banking & FinanceMedium
What is the primary purpose of 'Certificate of Deposit' (CD) in the Indian money market?
A. A negotiable money market instrument issued by scheduled commercial banks to raise wholesale short-term funds✓ Correct Answer
B. A long-term equity instrument issued by public sector undertakings to finance infrastructure projects
C. A retail savings certificate issued exclusively by post offices for senior citizens
D. A collateral-free lending mechanism between central bank and primary dealers
💡 Solution & Explanation
A Certificate of Deposit is a negotiable money market instrument issued in dematerialized form by scheduled commercial banks to mobilize wholesale short-term funds from institutional investors. It differs from long-term capital market securities or retail postal savings schemes. Familiarity with money market instruments is important for banking awareness questions.
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