Economics • Banking & FinanceMedium
What is the primary role of the 'Clearing Corporation of India Limited' in the Indian financial markets?
A. To act as a central counterparty for clearing and settling trades in money, G-secs, and foreign exchange markets✓ Correct Answer
B. To audit the financial statements of all cooperative banks operating across various states
C. To formulate micro-prudential guidelines for rural regional banks regarding agricultural lending
D. To manage the physical printing and distribution of currency notes across regional currency chests
💡 Solution & Explanation
The Clearing Corporation of India Limited functions as a central counterparty, providing guaranteed clearing and settlement services for transactions in government securities, money markets, and foreign exchange. By novating trades, it mitigates settlement risk and enhances operational efficiency in financial markets. It was promoted by major commercial banks and financial institutions under the guidance of the Reserve Bank of India. This institutional arrangement safeguards systemic stability across wholesale financial markets.
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