Question

UPSC Prelims 2024 Question:

With reference to the Indian economy, "Collateral Borrowing and Lending Obligations" are the instruments of

1. Bond market
2. Forex market
3. Money market
4. Stock market

Answer (Detailed Solution Below)

Option 3: Money market

Detailed Solution

Explanation:

The term “Collateralized Borrowing and Lending Obligation (CBLO)” is discussed in the context of money market instruments. A collateralized borrowing and lending obligation (CBLO) is a money market instrument that represents an obligation between a borrower and a lender concerning the terms and conditions of a loan.
CBLOs represent an agreement between a borrower and a lender, where the borrower provides collateral (such as government securities) in exchange for cash from the lender. These short-term instruments facilitate borrowing and lending in a fully collateralized environment, primarily in India’s financial markets.

Therefore, option (3) is the correct answer.

Subject: Economics | Financial Sectors and Capital Market

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