Economics • Banking & FinanceMedium
What is the primary function of the 'Collateralized Borrowing and Lending Obligation (CBLO)' or its modern replacement Tri-party Repo in the Indian money market?
A. To provide long-term foreign exchange reserves to multinational corporations.
B. To enable market participants to borrow and lend short-term funds against government securities as collateral.✓ Correct Answer
C. To finance retail housing loans at subsidized interest rates.
D. To regulate the capital adequacy ratios of cooperative banks.
💡 Solution & Explanation
The Tri-party Repo or former CBLO operates in the Indian money market as an instrument enabling institutions to secure short-term funds by pledging government securities as collateral. Other choices incorrectly associate the mechanism with foreign exchange reserves, retail housing subsidies, or cooperative bank capital regulations. Banking and financial awareness sections frequently examine money market instruments and liquidity management tools.
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