During the period of Diwali, people prefer to keep money at home and hence do not deposit money in the bank. There are also frequent withdrawals from the ATM in the form of cash. Due to this, banks all over the country may face the problem of low liquid cash. Identify the money market instrument that the bank can use to solve their financial problem.
During the period of Diwali, people prefer to keep money at home and hence do not deposit money in the bank. There are also frequent withdrawals from the ATM in the form of cash. Due to this, banks all over the country may face the problem of low liquid cash. Identify the money market instrument that the bank can use to solve their financial problem.
Solution
✅ Correct Option: 3
Certificate of Deposit (CD) is an unsecured, negotiable instrument issued by commercial banks and development financial institutions during periods of tight liquidity when deposit growth is slow but credit demand is high. Banks issue CDs to raise funds to meet liquidity shortages.
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