Question 76 from UPSC CSE 2024 - Economic s

Question

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

IASCODEX · Accepted Answer

Correct Option: C. Money market

Strategy: Identify the term 'Collateral Borrowing and Lending Obligations' (CBLOs) and connect it to short-term institutional borrowing and lending. CBLOs are linked to liquidity management and overnight/short-tenor transactions, which are hallmarks of the money market, not bonds, forex, or stock markets. Recognizing their use for money market participants leads directly to option C.

Key Info: ## Collateral Borrowing and Lending Obligations (CBLO)

CBLOs are money market instruments introduced in India. They enable entities with surplus funds to lend to those with borrowing needs for short periods--ranging from overnight up to typically 1 year.

### Key Characteristics
*   **Secured Operations:** Lending is backed by eligible securities (usually government securities) as collateral.
*   **Management:** Developed and managed by the Clearing Corporation of India Ltd. (CCIL) under RBI guidance.
*   **Purpose:** Primarily to facilitate liquidity for institutional participants (banks, primary dealers, mutual funds, insurance companies, and others) when traditional call money markets were restricted.
*   **Market Determined:** The rate and tenor of CBLOs are determined by the market.
*   **Market Segment:** Operate within the money market, which deals in highly liquid, short-term instruments such as Treasury Bills, Commercial Paper, Certificates of Deposit, and CBLOs. This distinguishes them from bond, stock, or forex markets.
*   **Trading:** CBLO trading takes place on an electronic platform, contributing to deepening the Indian money market and improving liquidity management by financial institutions.

IASCODEX · Answer

Option A: Bond market

IASCODEX · Answer

Option B: Forex market

IASCODEX · Answer

Option D: Stock market