🧷 Authentic Classroom Explanation by IAS Monk

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📌 The Question:

With reference to the Indian economy, “Collateral Borrowing and Lending Obligations (CBLO)” are the instruments of:

(a) Bond market
(b) Forex market
(c) Money market
(d) Stock market

✅ Correct Answer: (c) Money market

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🧠 Curiosity Raiser

If CBLOs look like bonds and earn interest, why are they not part of the bond market?

👉 The secret lies not in returns, but in tenure and purpose.

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📘 Enrichment Notes (CBLO unpacked)

🔹 What is CBLO?

• Collateral Borrowing and Lending Obligation (CBLO) is a short-term money market instrument
• It represents a secured borrowing-lending transaction
• Borrowings are backed by government securities as collateral

🔹 Key Features

• Short-term maturity (typically overnight to a few days)
• Used mainly for liquidity management
• Interest rate, tenure, and amount are negotiated
• Operated by Clearing Corporation of India Ltd. (CCIL) under RBI’s oversight

🔹 Why Money Market?

Money market instruments are:

• Short-term
• Highly liquid
• Used to manage temporary surplus or deficit of funds

📌 CBLO fits perfectly into this definition.

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❌ Why other options are incorrect?

• Bond Market: Deals with long-term debt instruments
• Forex Market: Deals with currencies
• Stock Market: Deals with equity ownership

CBLO is neither long-term, nor currency-based, nor equity-based.

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🧩 Final Takeaway

CBLO is a secured, short-term liquidity instrument —
👉 hence firmly a Money Market instrument

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🧘‍♂️ IAS Monk Whisper

In economics, maturity decides identity — not appearance.