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Consider the following statements regarding Collateralized Borrowing and Lending Obligation (CBLO) - a recent product of Clearing Corporation of India Ltd. (CCIL) :
1. The CBLO is like a repo, i.e. it can be interpreted as borrowing backed by securities as collateral.
2. Issued at a discount to face value, CBLOs always redeem at par, similar to treasury bills or zero coupon bonds.
3. Its maturities range from 1 year to 5 years.
Which of the statements given above is/are correct ?
  • a)
    1, 2 ad 3
  • b)
    2 and 3
  • c)
    1 and 2
  • d)
    1 and 3
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements regarding Collateralized Borrowing a...
CBLO - Collateralized Borrowing and Lending Obligation

Statement 1: CBLO is like a repo, i.e. it can be interpreted as borrowing backed by securities as collateral.

- CBLO is a money market instrument that involves borrowing and lending of funds between two parties.
- It is similar to a repo (repurchase agreement) in which one party sells securities to another party with an agreement to buy them back at a later date.
- In CBLO, the borrower pledges securities as collateral to the lender and borrows funds against them.
- The borrower pays interest on the borrowed funds to the lender and receives the pledged securities back on maturity of the CBLO.

Statement 2: Issued at a discount to face value, CBLOs always redeem at par, similar to treasury bills or zero coupon bonds.

- CBLOs are issued at a discount to face value, which means that the borrower receives less than the face value of the securities pledged as collateral.
- The discount is calculated based on the prevailing market interest rates and the maturity of the CBLO.
- CBLOs always redeem at par, which means that the borrower receives the face value of the securities back on maturity of the CBLO.
- This is similar to treasury bills or zero coupon bonds, which are also issued at a discount to face value and redeem at par.

Statement 3: Its maturities range from 1 year to 5 years.

- CBLOs have a maturity ranging from 1 day to 1 year.
- They are issued for a fixed term and cannot be redeemed before maturity.
- The maturity of the CBLO depends on the agreement between the borrower and the lender.
- CBLOs with longer maturities are generally used by institutional investors for managing their short-term funds.

Conclusion:

Hence, statement 1 and 2 are correct while statement 3 is incorrect. CBLOs have a maturity ranging from 1 day to 1 year.
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Consider the following statements regarding Collateralized Borrowing and Lending Obligation (CBLO) - a recent product of Clearing Corporation of India Ltd. (CCIL) : 1. The CBLO is like a repo, i.e. it can be interpreted as borrowing backed by securities as collateral. 2. Issued at a discount to face value, CBLOs always redeem at par, similar to treasury bills or zero coupon bonds. 3. Its maturities range from 1 year to 5 years. Which of the statements given above is/are correct ?a)1, 2 ad 3b)2 and 3c)1 and 2d)1 and 3Correct answer is option 'C'. Can you explain this answer?
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Consider the following statements regarding Collateralized Borrowing and Lending Obligation (CBLO) - a recent product of Clearing Corporation of India Ltd. (CCIL) : 1. The CBLO is like a repo, i.e. it can be interpreted as borrowing backed by securities as collateral. 2. Issued at a discount to face value, CBLOs always redeem at par, similar to treasury bills or zero coupon bonds. 3. Its maturities range from 1 year to 5 years. Which of the statements given above is/are correct ?a)1, 2 ad 3b)2 and 3c)1 and 2d)1 and 3Correct answer is option 'C'. Can you explain this answer? for Banking Exams 2024 is part of Banking Exams preparation. The Question and answers have been prepared according to the Banking Exams exam syllabus. Information about Consider the following statements regarding Collateralized Borrowing and Lending Obligation (CBLO) - a recent product of Clearing Corporation of India Ltd. (CCIL) : 1. The CBLO is like a repo, i.e. it can be interpreted as borrowing backed by securities as collateral. 2. Issued at a discount to face value, CBLOs always redeem at par, similar to treasury bills or zero coupon bonds. 3. Its maturities range from 1 year to 5 years. Which of the statements given above is/are correct ?a)1, 2 ad 3b)2 and 3c)1 and 2d)1 and 3Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for Banking Exams 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding Collateralized Borrowing and Lending Obligation (CBLO) - a recent product of Clearing Corporation of India Ltd. (CCIL) : 1. The CBLO is like a repo, i.e. it can be interpreted as borrowing backed by securities as collateral. 2. Issued at a discount to face value, CBLOs always redeem at par, similar to treasury bills or zero coupon bonds. 3. Its maturities range from 1 year to 5 years. Which of the statements given above is/are correct ?a)1, 2 ad 3b)2 and 3c)1 and 2d)1 and 3Correct answer is option 'C'. Can you explain this answer?.
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