It is short term negotiable instrument issued by Reserve Bank of India on behalf of Government maturing in less than one year. Identify the money market instrument mentioned above?

The correct option is Treasury Bill.

Step-by-step Explanation:

1. Understanding Treasury Bills (T-Bills):
A Treasury Bill is a short-term financial instrument issued by the central bank of a country—in India, the Reserve Bank of India (RBI)—on behalf of the Central Government to meet its short-term requirement of funds.

2. Key Features of Treasury Bills:
- Issuer: Issued by the Reserve Bank of India (RBI) on behalf of the Government of India.
- Maturity Period: They are short-term debt instruments with maturities of less than one year (typically issued with maturities of 91 days, 182 days, and 364 days).
- Nature: They are highly liquid, negotiable instruments with zero default risk because they are backed by the government. They are also known as Zero Coupon Bonds because they do not pay any interest during their tenure; instead, they are issued at a discount and redeemed at par (face value).

3. Why other options are incorrect:
- Commercial paper: This is an unsecured promissory note issued by highly rated corporate enterprises to raise short-term funds, not by the RBI on behalf of the Government.
- Certificate of Deposit: These are unsecured, negotiable instruments issued by commercial banks and development financial institutions to individuals, corporations, and trusts.
- Commercial bill: This is a instrument of credit used to finance the working capital requirements of business firms, arising out of credit sales of goods.