With reference to the Indian economy, consider the following statements: 1) ‘Commercial Paper’ is a short-term unsecured promissory note. 2) ‘Certificate of Deposit’ is a long-term instrument issued by the Reserve Bank of India to a corporation. 3) ‘Call Money’ is a short-term finance used for interbank transaction. 4) ‘Zero-Coupon Bonds’ are the interest-bearing short-term bonds issued by the Scheduled Commercial Banks to corporations. Which of the pairs above is/are correctly matched?

Statements 1 and 3 are correct, so the answer is C.

Commercial Paper is an unsecured, short-term promissory note issued by corporates and some financial institutions to meet working capital needs, usually with maturities from 7 days to one year. Call money is the very short-term, overnight or short-notice segment of the interbank market, where banks lend and borrow reserves to manage daily liquidity. Both are money market instruments, and that is the core concept here.

• Statement 2 is wrong. Certificates of Deposit are issued by scheduled commercial banks and financial institutions, not by RBI to corporations. They are short-term (7 days to 1 year), tradable, unsecured money market instruments, not long-term ones.
• Statement 4 is wrong. Zero-coupon bonds carry no periodic interest. They are issued at a discount and redeemed at face value. They are typically long-term and issued by corporates or financial institutions, not by scheduled commercial banks as short-term interest-bearing paper.

For Mains, this connects to RBI's liquidity management and money market reforms, where call money rates act as a signal of interbank liquidity conditions.

Trap: candidates assume any instrument issued by banks or RBI is short-term and interest-bearing, and mark statement 2 or 4 as correct on a vague memory of the names.