Consider the following statements 1 Call money market deals with very short term liquidity 2 Mumbai ...........

Economic Affairs Money Supply and Monetary Policy

Consider the following statements:

1.Call money market deals with very short term liquidity.

2.Mumbai Inter-Bank Offer Rate (MIBOR) is the rate at which the banks would like to borrow from other banks and Mumbai Inter-Bank Bid Rate (MIBID) is the rate for lending.

3.The MIBOR is decided by the consortium of banks under the supervision of RBI.

Which of the statements given above is/are correct?

1 only

1 and 2 only

2 only

1, 2 and 3

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Explanation:

The correct option is 1: 1 only.

Call money market does deal with very short-term liquidity.

MIBOR (Mumbai Inter-Bank Offer Rate) is the rate at which banks are willing to lend to other banks, and MIBID (Mumbai Inter-Bank Bid Rate) is the rate at which banks are willing to borrow from other banks. The statement incorrectly mentions the roles of MIBOR and MIBID.

MIBOR is typically determined by polling a panel of contributing banks and financial institutions; it is not decided by a consortium of banks under the supervision of the RBI.