Home › Exam notes › IBPS Banking › Money & Capital Markets

Money & Capital Markets

Banking / Economy Awareness · Institutions, Markets & Economy

Overview

Money markets deal in short-term funds (up to one year); capital markets deal in long-term funds through shares and bonds.

Key points

Treasury bills are issued for 91, 182 and 364 days.
Call money is overnight inter-bank borrowing.
Commercial paper is issued by companies; certificates of deposit by banks.
Primary market: new issues (IPO); secondary market: trading of existing securities.
BSE (1875) is Asia’s oldest stock exchange; NSE began operations in 1994 (incorporated 1992). Sensex has 30 stocks; Nifty 50 has 50.

Explanation

Mutual funds pool investors’ money; SEBI regulates them.
Bonds pay fixed interest (coupon); bond prices move opposite to interest rates.
Demat accounts hold securities electronically.
SEBI regulates both primary and secondary markets.

Step by step

Identify the institution, rule or instrument asked.
Recall its definition, year, limit or function from a table.
Eliminate options from similar institutions or older rules.

Examples

Tenures of Treasury bills → 91, 182 and 364 days.
Number of stocks in the Sensex → 30.
A company’s first public share issue → IPO.

Traps and advanced points

Trap: Calling T-bills long-term.
Trap: Mixing CP (companies) and CD (banks).
Trap: Saying bond prices rise when interest rates rise.

Quick revision

Money market ≤ 1 year.
Sensex 30, Nifty 50.
CP companies, CD banks.

Practice MCQs

Which banking/finance term is best described as: Loan-to-Value ratio?
1. IFSC
2. NEFT
3. LTV
4. CASA
Read chapter notes · Similar questions
Show answer
Answer: (c) LTV. Loan amount relative to value of the financed/collateral asset.
Which banking/finance term is best described as: ability to meet short-term obligations?
1. cheque crossing
2. RBI
3. liquidity
4. UPI
Read chapter notes · Similar questions
Show answer
Answer: (c) liquidity. Liquidity is different from long-term solvency.
Which banking/finance term is best described as: international bank-capital/liquidity/risk standards developed by the Basel Committee?
1. Basel norms
2. AML
3. liquidity
4. EBLR
Read chapter notes · Similar questions
Show answer
Answer: (a) Basel norms. Implemented through domestic regulatory rules.
Which banking/finance term is best described as: temporary deferment arrangement under specified loan terms/rules?
1. priority sector lending
2. endorsement
3. moratorium
4. credit score
Read chapter notes · Similar questions
Show answer
Answer: (c) moratorium. Interest treatment depends on the specific scheme/contract.
Which term-description pair is correctly matched for the concept “LTV”?
1. repo rate — Loan-to-Value ratio
2. bank rate — Loan-to-Value ratio
3. LTV — National Electronic Funds Transfer
4. LTV — Loan-to-Value ratio
Read chapter notes · Similar questions
Show answer
Answer: (d) LTV — Loan-to-Value ratio. Loan amount relative to value of the financed/collateral asset.
Treasury bills are NOT issued for —
1. 364 days
2. 5 years
3. 91 days
4. 182 days
Read chapter notes · Similar questions
Show answer
Answer: (b) 5 years. Only 91, 182 and 364 days.
Overnight inter-bank borrowing is —
1. commercial paper
2. treasury bill
3. bond
4. call money
Read chapter notes · Similar questions
Show answer
Answer: (d) call money. Call money.
Commercial paper is issued by —
1. RBI
2. government
3. companies
4. banks only
Read chapter notes · Similar questions
Show answer
Answer: (c) companies. Companies.
Certificates of deposit are issued by —
1. banks
2. companies
3. SEBI
4. RBI only
Read chapter notes · Similar questions
Show answer
Answer: (a) banks. Banks.
An IPO is part of the —
1. money market
2. forex market
3. primary market
4. secondary market
Read chapter notes · Similar questions
Show answer
Answer: (c) primary market. New issues.