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What role does the "Clearing Corporation of India Limited (CCIL)" play in the Indian money market?
- a)Determines interest rates
- b)Clears transactions in government securities
- c)Grants loans against collateral
- d)Manages foreign exchange transactions
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
What role does the "Clearing Corporation of India Limited (CCIL)&...
The CCIL is responsible for clearing transactions in government securities and repurchase agreements on the Negotiated Dealing System.
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What role does the "Clearing Corporation of India Limited (CCIL)&...
b. Clears transactions in government securities
The Clearing Corporation of India Limited (CCIL) plays a crucial role in the Indian money market by clearing transactions in government securities. Here is how CCIL functions in the Indian money market:
Settlement of Trades:
CCIL acts as a central counterparty for trades in government securities. It steps in between the buyer and seller to guarantee the settlement of trades. This reduces counterparty risk and ensures smooth transactions.
Netting and Settlement:
CCIL facilitates the netting of trades, where multiple transactions are offset against each other to reduce the number of actual settlements. This process helps in efficient clearing and settlement of transactions.
Risk Management:
CCIL manages risks associated with the settlement of trades in government securities. It establishes risk management mechanisms to maintain the stability of the market and protect participants from default risks.
Collateral Management:
CCIL also manages collateral for trades in government securities. It ensures that sufficient collateral is available to cover potential losses in case of default by any participant.
Regulatory Compliance:
CCIL adheres to regulatory guidelines set by the Reserve Bank of India (RBI) and other regulatory authorities. It plays a key role in maintaining the integrity and transparency of the money market.
Overall, CCIL's role in clearing transactions in government securities is essential for the smooth functioning of the Indian money market, providing confidence to market participants and ensuring the efficient settlement of trades.
The Clearing Corporation of India Limited (CCIL) plays a crucial role in the Indian money market by clearing transactions in government securities. Here is how CCIL functions in the Indian money market:
Settlement of Trades:
CCIL acts as a central counterparty for trades in government securities. It steps in between the buyer and seller to guarantee the settlement of trades. This reduces counterparty risk and ensures smooth transactions.
Netting and Settlement:
CCIL facilitates the netting of trades, where multiple transactions are offset against each other to reduce the number of actual settlements. This process helps in efficient clearing and settlement of transactions.
Risk Management:
CCIL manages risks associated with the settlement of trades in government securities. It establishes risk management mechanisms to maintain the stability of the market and protect participants from default risks.
Collateral Management:
CCIL also manages collateral for trades in government securities. It ensures that sufficient collateral is available to cover potential losses in case of default by any participant.
Regulatory Compliance:
CCIL adheres to regulatory guidelines set by the Reserve Bank of India (RBI) and other regulatory authorities. It plays a key role in maintaining the integrity and transparency of the money market.
Overall, CCIL's role in clearing transactions in government securities is essential for the smooth functioning of the Indian money market, providing confidence to market participants and ensuring the efficient settlement of trades.
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What role does the "Clearing Corporation of India Limited (CCIL)" play in the Indian money market?a)Determines interest ratesb)Clears transactions in government securitiesc)Grants loans against collaterald)Manages foreign exchange transactionsCorrect answer is option 'B'. Can you explain this answer?
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