Which of the following instrument is used for inter-bank transactions for short-term finance repayable on demand with a maturity period of one day to fifteen days?

Correct option is C

The correct answer is Call Money. Call money refers to very short-term loans given by one bank to another, generally for a period ranging from 1 day to a maximum of 14–15 days. These funds are repayable on demand, meaning the lending bank can call back the money at any time within the agreed period. The call money market helps banks maintain their Cash Reserve Ratio (CRR) and manage daily liquidity mismatches. Other instruments like Commercial Paper, Treasury Bills, and Inter-Corporate Deposits do not serve the purpose of inter-bank overnight liquidity adjustment, hence they do not fit the criteria mentioned in the question.
Information Booster
· Call money is a part of the Organised Money Market.
· It is mainly used by banks to meet short-term liquidity requirements.
· When the period exceeds 1 day, it is called Notice Money.
· The interest rate in the call money market is known as the Call Rate, which fluctuates widely depending on liquidity.
The RBI regulates the call money market to ensure financial system stability.