Which of the following institutions does not operate in the money market?

Step 1: Analyze the question We need the institution that does NOT operate in the money market. The money market deals with short-term funds (typically less than one year), such as treasury bills, commercial papers, certificates of deposit, and call money.

Step 2: Explain the concept

• Money market: short-term borrowing and lending, with instruments maturing within a year.
• Capital market: medium and long-term funds, such as stocks, bonds, and long-term loans.

Step 3: Check each option

• A. Central bank: Operates in the money market. It issues treasury bills and uses open market operations to control liquidity. ✔
• B. Mortgage banks: They give long-term loans for housing and property, so they belong to the capital market. ✘
• C. Money deposit banks: These are the main players in the money market. They accept deposits, trade in treasury bills, and give short-term loans. ✔
• D. Insurance companies: This is the tricky one. Insurance companies are mainly capital market institutions because they invest long-term premiums in stocks, bonds, and property. However, they do also hold some short-term instruments such as treasury bills and commercial papers for liquidity. So they are weaker as a "non-money-market" answer than mortgage banks.

Step 4: Compare B and D Mortgage banks exist specifically to provide long-term finance for housing, which is a clear capital market activity. Insurance companies are more mixed, because they invest across both markets. The best answer for "does not operate in the money market" is therefore the mortgage banks.

Answer: B. Mortgage banks

Exam tip: Remember it this way: money market = short-term (central bank, commercial/money deposit banks, discount houses); capital market = long-term (mortgage banks, development banks, stock exchange). If an institution deals with long-term property or development finance, it is not a money market institution.