UPSC Prelims 2024 Q40: Indian Economy – Financial Markets
- (a) Bond market
- (b) Forex market
- (c) Money market
- (d) Stock market
Answer: (c) Money market
Explanation
CBLO (Collateralised Borrowing and Lending Obligation) — Market Segment
CBLO is a money market instrument developed by the Clearing Corporation of India Ltd (CCIL).
Key features:
- Short-term borrowing/lending: overnight to 90 days
- Backed by government securities as collateral
- Participants: banks, mutual funds, NBFCs, insurance companies
- Regulated by RBI
- Provides liquidity to financial institutions that cannot access the call money market
Money market instruments in India:
| Instrument | Tenor | Who issues |
|---|---|---|
| Call Money | Overnight | Banks |
| Treasury Bills | 91/182/364 days | Government of India |
| Commercial Paper (CP) | 7 days to 1 year | Corporates |
| Certificate of Deposit (CD) | 7 days to 1 year | Banks |
| CBLO | Overnight to 90 days | CCIL platform, collateral-backed |
| Repo | Overnight to 14 days | RBI to banks |
CBLO was replaced by Tri-party Repo (TREP) from November 2018 — same concept, updated mechanism under RBI's revised framework.
Answer: (c) Money market.
Why each option is right or wrong
- (a) Incorrect. CBLO is not a capital market instrument — capital markets deal with long-term securities (equities, bonds >1 year). CBLO is short-term.
- (b) Incorrect. CBLO is not a commodity market instrument — commodities are physical goods (gold, oil, wheat) traded on MCX or NCDEX.
- (c) CORRECT. CBLO is a money market instrument — short-term, collateral-backed borrowing/lending used for overnight to 90-day liquidity management.
- (d) Incorrect. CBLO is not specifically a forex market instrument, though financial institutions active in forex may use CBLO for rupee liquidity.
Key point
CBLO = money market instrument. Short-term collateral-backed borrowing on CCIL platform. Replaced by TREP (Tri-party Repo) from 2018.
Remember
CBLO = money market. Collateral-backed short-term borrowing on CCIL. Replaced by Tri-party Repo (TREP) in 2018.
Common mistakes
- Confusing money market (short-term < 1 year) with capital market (long-term > 1 year).
- Not knowing CBLO was replaced by TREP — UPSC may test both the old and new names.
- Thinking collateral = capital market — collateral just means secured lending, can be short-term.
Exam tip
Money market mnemonic: T-bills, CP, CD, Call Money, Repo, CBLO/TREP — all short-term. CBLO = overnight to 90 days, backed by G-Secs. TREP replaced CBLO in 2018.
Sources
- RBI — Money Market Instruments
- Clearing Corporation of India Limited — Tri-party Repo (TREP), the successor to CBLO