UPSC Prelims 2020— Question 80

This question tests commercial paper, certificates of deposit and call money. The key concept is: Commercial paper is a short-term unsecured promissory instrument issued by eligible corporates and financial entities. Certificates of deposit are short-term negotiable instruments issued by banks, not long-term RBI instruments issued to corporations. Call money is very short-term borrowing/lending, mainly in the interbank market. Zero-coupon bonds are not interest-bearing instruments in the sense stated. Hence statements 1 and 3 are correct. The verified answer for the uploaded Set-B paper is option C. Option A — 1 and 2 only: This is not the correct option. The option does not match the verified combination or conclusion. The decisive point is the distinction explained above: Commercial paper is a short-term unsecured promissory instrument issued by eligible corporates and financial entities. Certificates of deposit are short-term negotiable instruments issued by banks, not long-term RBI instruments issued to corporations. Call money is very short-term borrowing/lending, mainly in the interbank market. Zero-coupon bonds are not interest-bearing instruments in the sense stated. Hence statements 1 and 3 are correct. Therefore this alternative should be eliminated even if part of its wording appears plausible in isolation. Option B — 4 only: This is not the correct option. The option does not match the verified combination or conclusion. The decisive point is the distinction explained above: Commercial paper is a short-term unsecured promissory instrument issued by eligible corporates and financial entities. Certificates of deposit are short-term negotiable instruments issued by banks, not long-term RBI instruments issued to corporations. Call money is very short-term borrowing/lending, mainly in the interbank market. Zero-coupon bonds are not interest-bearing instruments in the sense stated. Hence statements 1 and 3 are correct. Therefore this alternative should be eliminated even if part of its wording appears plausible in isolation. Option C — 1 and 3 only: This is the correct option. It matches the verified conclusion because Commercial paper is a short-term unsecured promissory instrument issued by eligible corporates and financial entities. Certificates of deposit are short-term negotiable instruments issued by banks, not long-term RBI instruments issued to corporations. Call money is very short-term borrowing/lending, mainly in the interbank market. Zero-coupon bonds are not interest-bearing instruments in the sense stated. Hence statements 1 and 3 are correct. The wording of the option is consistent with the governing concept tested by the question. Option D — 2, 3 and 4 only: This is not the correct option. The option does not match the verified combination or conclusion. The decisive point is the distinction explained above: Commercial paper is a short-term unsecured promissory instrument issued by eligible corporates and financial entities. Certificates of deposit are short-term negotiable instruments issued by banks, not long-term RBI instruments issued to corporations. Call money is very short-term borrowing/lending, mainly in the interbank market. Zero-coupon bonds are not interest-bearing instruments in the sense stated. Hence statements 1 and 3 are correct. Therefore this alternative should be eliminated even if part of its wording appears plausible in isolation. For UPSC-style elimination, first identify the exact proposition being tested, then evaluate each statement independently before comparing the answer codes. Avoid treating a broad or absolute statement as correct merely because its general theme is familiar. The precise qualifiers in the question—such as 'all', 'only', 'cannot', 'largest', 'always' or a specific institutional role—often determine the answer. On that basis, option C is the verified answer.