In the money market instrument called CBLO, what does the letter \"C\" stand for?

Introduction / Context:
This question deals with a specific money market instrument used in the Indian financial system: CBLO. Understanding such instruments is important in banking and financial awareness sections. CBLO is widely used for short term funds management by banks and financial institutions. The abbreviation expands to Collateralized Borrowing and Lending Obligation, and you are asked to identify what the letter “C” stands for.

Given Data / Assumptions:

• CBLO is a money market instrument.
• The full form is Collateralized Borrowing and Lending Obligation.
• We must determine the word represented by the letter “C”.
• Options provided are Clearing, Culminative, Collateralized and Credit.

Concept / Approach:
CBLO is a form of borrowing and lending backed by collateral, usually government securities. Hence the first word in its full form is “Collateralized”. The approach is to recall or reconstruct the full name of the instrument. Because the entire structure of CBLO is based on collateral backing the borrowing and lending, “Collateralized” is the only option that fits both the expansion and the concept.

Step-by-Step Solution:
Step 1: Recall that CBLO stands for Collateralized Borrowing and Lending Obligation.Step 2: Break this expansion into initials: C for Collateralized, B for Borrowing, L for Lending, O for Obligation.Step 3: The question asks about the letter “C”, which corresponds to the first word in the expansion.Step 4: Compare with the options provided.Step 5: Only “Collateralized” exactly matches the full form and describes the nature of the instrument.Step 6: Therefore, the correct answer is Collateralized.

Verification / Alternative check:
Reading about CBLO in RBI documents or financial market guides confirms that CBLO is a collateral backed borrowing and lending product operated through a clearing house. The central idea is that borrowing is done against securities placed as collateral. This aligns directly with the word “Collateralized”. While the instrument is settled through a clearing corporation, the formal expansion emphasises collateral, not just clearing, confirming that option C is correct.

Why Other Options Are Wrong:
Clearing: Although CBLO transactions involve a clearing corporation, the official expansion does not use “Clearing” as the first word.

Culminative: This is not a standard term in this context and does not appear in the expansion.

Credit: While CBLO is related to credit markets, the specific alphabet “C” in CBLO does not stand for Credit.

Since none of these matches the official full form of CBLO, they are incorrect.

Common Pitfalls:
Students may get distracted by the fact that many money market operations involve clearing corporations, so they might incorrectly choose “Clearing”. Others might guess “Credit” because CBLO is a lending instrument. The best way to avoid such errors is to memorise a small set of key expansions like CBLO, CD (Certificate of Deposit), CP (Commercial Paper) and repo, along with their conceptual meanings.

Final Answer:
In CBLO, the letter “C” stands for Collateralized.