INDIAN MONEY MARKET
PROJECT PROJECT REPORT ON INDIAN MONEY MARKET
SUBMITTED TO
GURU NANAK DEV UNIVERSITY IN PARTIAL FULFILMENT OF THE REQUIREMENT REQUIREMENT FOR THE DEGREE OF MASTER OF BUSINESS ECONOMICS
UNDER GUIDANCE OF Mrs. RENU BHATIA
SUBMITTED BY YASHVANT SINGH
NEW DELHI INSTITUTE OF MANAGEMENT
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DECLARATION Hereby I declare that the project report entitled “ INDIAN MONEY MARKET” MARKET” submitted for the degree of Master of Business Economics, is my original work and the project report has not formed the basis for the award of any diploma, degree, associate ship, fellowship or similar other titles. It has not been submitted to any other university or institution for the award of any degree or diploma.
Place:
YASHVANT YASHVANT SINGH
Date:
MBE-IV Sem
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CERTIFICATE This is to certify that Ms. YASHVANT SINGH of MBE fourth semester of NEW DELHI INSTITUTE OF MANAGEMENT has completed her project report on the topic “PROJECT REPORT ON INDIAN MONEY MARKET” under the supervi sup ervision sion of Mrs. RENU BHATIA faculty member of NDIM.
To best of my knowledge the report is original and has not been copied or submitted anywhere else. It is an independent work done by her. h er.
Mrs. RENU BHATIA
NDIM
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ACKNOWLEDGEMENT Survey is an excellent tool for learning and exploration. No classroom routine can substitute which is possible while working in real situations. Application of theoretical knowledge to practical situations situations is the bonanzas bonanzas of this survey.
Without a proper combination of inspection and perspiration, it’s not easy to achieve anything. There is always a sense of gratitude, which we express to others for the help and the needy services they render during the different phases of our lives. I too would like to do it as I really wish to express my gratitude toward all those who have been helpful to me directly or indirectly during the development of this project.
First of all I wish to express express my profound gratitude gratitude and sincere thanks to my professor Mrs. RENU BHATIA who was always there to help and guide me when I needed help. His
perceptive criticism criticism kept me working working to make this project more more full proof. I am thankful to him for his encouraging and valuable support. Working under him was an extremely knowledgeable and enriching experience for me. I am very thankful to him for all the value addition and enhancement done to me.
No words can adequately express express my overriding debt of gratitude to my parents whose support helps me in all the way. Above all I shall thank my friends who constantly encouraged and blessed me so as to enable enable me to do this work successfully.
YASHAVANT SINGH MBE
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TABLE OF CONTENTS CONTENTS CHAPTER NUMBER I
CHAPTER NAME
CONTENTS
PAGE NUMBER NUMBER
INTRODUCTION OF INDIAN
Meaning of Money Market
MONEY MARKET Definition of Money Market Objectives of Money Market General Characteristics Characteristics of Money Market History of Indian Money II
INTRODUCTION OF
Market HISTORY OF CHOCOLATE
CHOCOLATE AND COMPANY’S PROFILE CHOCOLATE PRODUCTION CONSUMTION OF CHOCOLATE CHOCOLATE IN INDIA NESTLE’S NESTLE’S PROFI PROFILE LE CADBURY’S PROFILE III
LITERATURE REVIEW
IV
RESEARCH & DESIGN
BASIS OF RESEARCH AND
V
METHODOLOGY FINDINGS & ANALYSIS
DESIGN ANALYSIS OF DATA FINDINGS CONCLUSION SUGGESTIONS AND RECOMENDETATIONS
VI VII
BIBLIOGRAPHY ANNEXURE
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SUMMARY: The seventh largest and second most populous country in the world, India has long been considered a country of unrealized potential. A new spirit of economic freedom is now stirring in the country, bringing sweeping changes in its wake. A series of ambitious economic reforms aimed at deregulating the country and stimulating foreign investment has moved India firmly into the front ranks of the rapidly growing Asia Pacific region and unleashed the latent strengths of a complex and rapidly changing nation. India's process of economic reform is firmly rooted in a political consensus that spans her diverse political parties. India's democracy is a known and stable factor, which has taken deep roots over nearly half a century. Importantly, India has no fundamental conflict between its political and economic systems. Its political institutions have fostered an open society with strong strong collec collectiv tivee and indivi individua duall rights rights and an enviro environme nment nt suppo support rtive ive of free free econo economi micc enterprise. India's time tested institutions offer foreign investors a transparent environment that guarantees the security of their long term investments. These include a free and vibrant press, a judiciary which can and does overrule the government, a sophisticated legal and accounting system and a user friendly intellectual infrastructure. India's dynamic and highly competitive private sector has long been the backbone of its economic activity. It accounts for over 75% of its Gross Domestic Product and offers considerable scope for joint ventures and collaborations. Today To day,, India India is one of the mo most st exciti exciting ng emerg emerging ing mo money ney marke markets ts in the world world.. Skill Skilled ed managerial and technical manpower that match the best available in the world and a middle class whose size exceeds the population of the USA or the European Union, provide India with a distinct cutting edge in global competition. The average turnover of the money market in India is over Rs. 40,000 crores daily . This is more than 3 percents of the total money supply in the Indian economy and 6 percent of the total funds that commercial banks have let out to the system. This implies that 2 percent of the annual GDP of India gets traded in the money market in just one day. Even though the money
market is many times larger than the capital market, it is not even fraction of the daily trading in developed markets.
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1) Meaning of Money Market: Money Mo ney marke markett refer referss to the marke markett wher wheree mo money ney and highly highly liquid liquid marke marketab table le securities are bought and sold having a maturity period of one or less than one year. It is not a place like the stock market but an activity conducted by telephone. The money market constitutes a very important segment of the Indian financial system. The highly liquid marketable securities are also called as ‘ money market instruments’ like treasury bills, government securities, commercial paper, certificates certificates of deposit, call money, repurchase agreements etc. The major player in the money market market are Reserve Bank of India (RBI), (RBI), Discount and Finance House of India (DFHI), banks, financial institutions, mutual funds, government, big corporate houses. The basic aim of dealing in money market instruments is to fill the gap of short-term liquidity problems problems or to deploy the short-term surplus to gain income on that.
2) Definition of Money Market: According to the McGraw Hill Dictionary of Modern Economics, “money market is
the term designed to include the financial institutions which handle the purchase, sale, and transfers of short term credit instruments. The money market includes the entire machinery for the channeliz channelizing ing of short-te short-term rm funds. funds. Concern Concerned ed primarily primarily with small small business business needs needs for working capital, individual’s borrowings, and government short term obligations, it differs from the long term or capital market which devotes its attention to dealings in bonds, corporate stock and mortgage credit.” According to the Reserve Bank of India, “money market is the centre for dealing,
mainly of short term character, in money assets; it meets the short term requirements of borrowings and provides liquidity liquidity or cash to the lenders. lenders. It is the place place where short term surplus investible funds at the disposal of financial and other institutions and individuals are bid by borrowers’ agents agents comprising comprising institutions and individuals and also the government itself.” According to the Geoffrey, “money market is the collective name given to the various
firms and institutions that deal in the various grades of the near money.”
3) Objectives of Money Market: 2 2
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A well developed money market serves the following objectives:
Providing an equilibrium mechanism for ironing out short-term surplus and deficits.
Providing a focal point for central bank intervention for the influencing liquidity in the economy.
Prov Provid idin ing g acce access ss to user userss of shor shortt-te term rm mo mone ney y to meet meet thei theirr requ requir irem emen ents ts at a reasonable price.
4) General Characteristics of Money Market: 2 2
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The general characteristics of money market are outlined below:
Short-term funds are borrowed and lent. No fixed place for conduct of operations, the transactions being conducted even over the phone and therefore, there is an essential need for the presence of well developed communications system.
Dealings may be conducted with or without the help the brokers.
Thee sho Th shortrt-ter term m financ financial ial asset assetss that that are dealt dealt in are close close sub substi stitut tutes es for mo money ney,, financial assets being converted into money with ease, speed, without loss and with minimum transaction cost.
Funds are traded for a maximum period of one year.
Pres Presen ence ce of a larg largee numb number er of subm submar arke kets ts such such as inte inter-b r-ban ank k call call mo mone ney, y, bill bill rediscounting, and treasury bills, etc.
4) History of Indian Money Market: Till Till 1935, 1935, when the RBI was was set set up the Indian Indian mo money ney market market remain remained ed highly highly disinteg disintegrated rated,, unorganiz unorganized, ed, narrow, narrow, shallow shallow and therefore therefore,, very backwar backward. d. The planned planned economic development development that commenced in the year 1951 market an important beginning in the annals of the Indian money market. The nationalization of banks in 1969, setting up of various committees such as the Sukhmoy Chakraborty Committee (1982), the Vaghul working group (1986), the setting up of discount and finance house of India ltd. (1988), the securities trading corporation of India (1994) and the commencement of liberalization and globalization process in 1991 gave a further fillip for the integrated and efficient development of India money market.
5) The Role of the Reserve Bank of India in the Money Market: The Reserve Bank of India is the most important constituent of the money market. The market comes within the direct preview of the Reserve Bank of India regulations. The aims of the Reserve Bank’s operations in the money market are: 2 2
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To ensure that liquidity and short term interest rates are maintained at levels consistent with the monetary policy objectives of maintaining price stability.
To ensure an adequate flow of credit to the productive sector of the economy and
To bring about order in the foreign exchange market.
The Reserve Bank of India influence liquidity and interest rates through a number of operating instruments - cash reserve requirement (CRR) of banks, conduct of open market operat operation ionss (OMO (OMOs), s), repos repos,, change change in bank bank rates rates and at times times,, foreig foreign n excha exchange nge sw swap ap operations
Treasury Bills: Treasury bills are short-term instruments issued by the Reserve Bank on behalf of the govern gov ernme ment nt to tide tide over over sho short rt-te -term rm liquid liquidity ity sho shortf rtfal alls. ls. Th This is instr instrum ument ent is used used by the government to raise short-term funds to bridge seasonal or temporary gaps between its receipt (revenue (revenue and capital) capital) and expenditure. expenditure. They form the most importa important nt segment segment of the money market not only in India but all over the world as well. In other words, T-Bills are short term (up to one year) borrowing instruments of the Government of India which enable investors to park their short term surplus funds while reducing their market risk T-bills are repaid at par on maturity. The difference between the amount paid by the tenderer at the time of purchase (which is less than the face value) and the amount received on maturity represents the interest amount on T-bills and is known as the discount. Tax deducted at source (TDS) is not applicable on T-bills.
Features of T-bills are:
They are negotiable securities.
They are highly liquid as they are of shorter tenure and there is a possibility of an interbank repos on them.
There is absence of default risk. 2 2
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They have an assured yield, low transaction cost, and are eligible for inclusion in the securities for SLR purpose.
They are not issued in scrip form. The purchases and sales are affected through the subsidiary general ledger (SGL) (SGL) account. T-Bills are issued in the form of SGL entries in the books of Reserve Bank of India to hold the securities on behalf of the holder. The SGL holdings can be transferred by issuing a SGL transfer form
Rece Re centl ntly y TT-Bi Bills lls are al also so be being ing iss issued ued fre freque quentl ntly y und under er the Ma Marke rkett St Stabi abiliz lizati ation on Scheme (MSS).
Types of Treasury Bills: Treasury bills (T-bills) offer short-term investment opportunities, generally up to one year. They are thus useful in managing short-term liquidity. At present, RBI issues T-Bills for three different maturities : 91 days, 182 days and 364 days. The 91 day T-Bills are issued on weekly auction basis while 182 day T-Bill auction is held on Wednesday preceding non-reporting Friday and 364 day T-Bill auction on Wednesday preceding the reporting Friday. There are no treasury bills issued by State Governments. Governments.
Advantages of investing in T-Bills:
No Tax Tax Deducted at Source (TDS) (TDS)
Zero default risk as these are the liabilities of GOI
Liquid money Market Instrument
Active secondary market thereby enabling holder h older to meet immedia immediate te fund requireme requirement. nt.
Amount: Treasury bills are available for a minimum amount of Rs.25,000 and in multiples of Rs. 25,000. Treasury bills are issued at a discount and are redeemed at par. Treasury bills are also issued
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under under the Market Market Stabiliz Stabilizatio ation n Scheme Scheme (MSS). (MSS). Th They ey are ava availa ilable ble in bot both h Pr Prima imary ry and Secondary market.
Auctions of Treasury Bills: While 91-day T-bills are auctioned every week on Wednesdays, 182 days and 364-day T-bills are auctioned every alternate week on Wednesdays. The Reserve Bank of India issues a quarterly calendar of T-bill auctions which is shown below (table 1.1). It also announces the exact dates of auction, the amount to be auctioned and payment dates by issuing press releases prior to every every auction.
Participants in the T-bills market: The Reserve Bank of India, India, mutual mutual funds, funds, financial financial institutions, institutions, primary dealers, dealers, satellite satellite dealers, provident funds, corporates, foreign banks, and foreign institutional investors are all participants in the treasury bill market. The sale government can invest their surplus funds as non-competitive non-competitive bidders in T-bills of all maturities. Treasury bills are pre-dominantly held by banks. In the recent years, there has been a growth in the number of non-competitive bids, resulting in significant holding of T- bills by provident funds, trusts and mutual funds. The table 1.2 presents holding pattern of outstanding T-bills.
Investors
At the end of march (Rs.in Cr.) 2008
2007
2006
2005
RBI
-
-
-
-
Banks
43,800
51,770
49,187
61,724
State Government
91,988
88,822
60,184
15,874
Others
41,195
27,991
8,146
11,628
Total t-bills outstanding
1,76,983
1,68,583
1,17,517
89,226
Source: RBI, Weekly Statistical Supplement, Various Issues. 2 2
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Issuance Process of T-Bills: Treasury bills (T-bills) are short -term debt instruments issued by the Central government. Three types of T-bills are issued: 91-day, 182-day and 364-day. T- bills are sold through an auction process announced by the RBI at a discount to its face value. RBI issues a calendar of T-bill auctions (Table 1.2) .It also announces the exact dates of auction, the amount to be auctioned and payment dates. T-bills are available for a minimum amount of Rs. 25,000 and in multiples of Rs. 25,000. Banks and PDs are major bidders in the T- bill market. Both discriminatory and uniform price auction methods are used in issuance of T-bills. Currently, the auctions of all T-bills are multiple/discriminatory price auctions, where the successful bidders have to pay the prices they have actually bid for. Non-competitive bids, where bidders need not quote the rate of yield at which they desire to buy these T-bills, are also allowed from provident funds and other investors. RBI allots bids to the non-competitive bidders at the weighted average yield arrived at on the basis of the yields quoted by accepted competitive bids at the auction. Allocations to non-competitive bidders are outside the amount notified for sale. Non-competitive bidders therefore do not face any uncertainty in purchasing the desired amount of T-bills from the auctions. Pursuant to the enactment of FRBM Act with effect from April 1, 2006, RBI is prohibited from participating in the primary market and hence devolvement on RBI is not allowed. Auction of all the Treasury Bills are based on multiple price auction method at present. The notified amounts of the auction is decided every year at the beginning of financial year (Rs.500 crore each for 91-day and 182-day Treasury Bills and Rs.1,000 crore for 364-day Treasury Bills for the year 2008-09) in consultation with GOI. RBI issues a Press Release detailing the notified amount and indicative calendar in the beginning of the financial year. The auction for MSS amount varies depending on prevailing market condition. Based on the requirement requirement of GOI and prevailing market condition, the RBI has discretion to change the notified amount. Also, it is
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discretion of the RBI to accept, reject or partially accept the notified amount depending on prevailing market market condition. condition.
Table 1.1 Treasury Bills- Auction Calendar Type of
Day of
Day of
T-bills
Auction
Payment*
91-day
Wednesday
Following Friday
182-day
Wednesday of non-reporting week
Following Friday
364-day
Wednesday of reporting week
Following Friday
* If the day of payment falls on a holiday, the payment is made on the day after the holiday. The calendar for the regular auction of TBs for 2008-09 was announced on March 24, 2008. The notified amounts were kept unchanged at Rs.500 crore for 91-day and 182- day TBs and Rs.1,000 Rs.1,000 crore for 364-day TBs. However, the notified amount (excluding MSS) of 91-day and 182 TBs and Rs.1,000 crore for 364 day TBs. However, the notified amount (excluding MSS) of 91-day TBs was increased by Rs.2,500 crore each on ten occasions and by Rs.1,500 crore each on ten occasions and by Rs.1,500 crore on one occasion and that of 182 day TBs was increased by Rs.500 crore on two occasions during 2008-09 (upto August 14, 2008). Thus, an additional amount of Rs.27,500 crore (Rs.17,500 crore, net) was raised over and above the notified amount in the calendar to finance the expected temporary cash mismatch arising from the expenditure on farmers’ debt waiver scheme.
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The summary of T- bill auctions conducted during the year 2007- 08 is in Table 1.3
Table 1.3: T-bill Auctions 2007- 08 - A Summary
91-days
182-days
364-days
No. of issues issues
54
27
26
Number of bids received received (competitive (competitive &
4,844
1,991
2,569
Amount of competitive bids (Rs. cr.)
301,904
115,531
170,499
Amount of non-competitive bids (Rs. cr.)
101,024
7,321
3,205
811
849
non-competitive)
Number of bids accepted (competitive & nonn on- 1935 competitive bids) Amount of competitive bids accepted (Rs.Cr.)
109,341
39,605
54,000
Devolvement on PDs (Rs. cr.)
-
-
-
Total Issue (Rs. cr)
210,365
46,926
57,205
Cut-off price - minimum (Rs.)
98.06
96.17
92.78
Cut-off price - maximum (Rs.)
98.90
97.18
93.84
Implicit yield at cut -off price - minimum (%)
4.4612
5.82
6.5824
39,957.06
16,785.00
57,205.30
Implicit yield at cut -off price - maximum (%) Outs Ou tsta tand ndin ing g amou amount nt (en (end of the the year year)) (Rs.cr.) 2 2
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Source: RBI Bulletin, Various Various Issues.
CUT-OFF YIELDS: T- bills are are issued at a discount and are redeemed redeemed at par. The implicit implicit yield in the T bill is the rate at which the issue price (which is the cut-off price in the auction) has to be compounded, for the number of days to maturity, to equal the maturity value. Yield, given price, is computed computed using the the formula:
= ((100-Price)*365)/ (Price * No of days to maturity)
Similarly, price can be computed, given yield, using the formula: = 100/(1+(yield% * (No of days to maturity/365)) For example, a 182-day T-bill, auctioned on January 18, at a price of Rs. 95.510 would have an implicit yield of 9.4280% computed as follows: = ((100-95.510)*365)/(95.510 ((100-95.510)*365)/(95.510*182) *182) 9.428% is the rate at which Rs. 95.510 will grow over 182 days, to yield Rs. 100 on maturity. Treasury bill cut-off yields in the auction represent the default -free money market rates in the economy, and are important benchmark rates.
Types of auctions of T-bills: There are two types of auctions:
Multiple-price Multiple-price auction
Uniform-price auction
Multiple-price auction: The Reserve Bank invites bids by price, that is, the bidders have to quote the price ( per Rs.100 face value) of the stock at which they desire to purchase. The bank then decides the cut-off
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price at which the the issue would be exhausted. exhausted. Bids above the cut-off price price are allotted allotted securities. In other words, each winning bidder pays the price it bid. The main advantage of this method is that the Reserve Bank obtains the maximum price each participant is willing willing to pay. It can can encourage competitive competitive bidding because because each bidder bidder is aware that it will have to pay the price it bid, not just the minimum accepted accepted price. If the bidders who paid higher prices could face large capital losses if the trading in these securities starts below the marginal price set at the auction. In order to eliminate the problem, the Reserve Bank introduced uniform price auction in case of 91-days T-bills.
Uniform-price auction: In this method, method, the Reserve Reserve Bank invites the bids in descendi descending ng order and accepts those that fully absorb the issue amount. Each winning bidders pays the same (uniform) price decided by the Reserve Bank. The advantages of the uniform price auction are that they tend to minimize uncertainty and encourage broader participation. participation. Most countries follow the multiple-price auction. However, However, now the trend is a shift towards the uniform-price auction. It was introduced on an experimental basis on November 6, 1998, in case of 91-days T-bills. Since 1999-2000, 91-day T-bills auctions are regularly conducted on a uniform price basis.
Commercial Paper: Commercial paper was introduced into the Indian money market during the year 1990, on the recommendation of Vaghul Committee. Now it has become a popular debt instrument of the corporate world. A commercial paper is an unsecured short-term instrument issued by the large banks and corporations in the form of promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period to meet the short-term financial requirement. There are four basic kinds of commercial paper: promissory notes, drafts, checks, and certificates of deposit.. deposit It is gener generall ally y issue issued d at a discou discount nt by the leading leading credit creditwo worth rthy y and highly highly rated rated corpor corporate ates. s. Depen Dependin ding g upo upon n the issuin issuing g compan company, y, a comme commerci rcial al paper paper is also also kno known wn as “Financial paper, industrial paper or corporate paper”. Commercial paper was initially meant to 2 2
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be used by the corporates borrowers having good ranking in the market as established by a credit rating agency to diversify their sources of short term borrowings at a rate which was usually lower than the bank’s working capital lending rate. Commercial papers can now be issued by primary dealers, satellite dealers, and allIndia financial institutions, apart from corporatist, to access short-term funds. Effective from 6th September 1996 and 17th June 1998, primary dealers and satellite dealers were also permitted to issue commercial commercial paper to access greater volume of funds to help increase their activities in the secondary market. It can be issued to individuals, banks, companies and other registered Indian corporate bodies and unincorporated bodies. It is issued at a discount determined by the issuer company. The discount varies with the credit rating of the issuer company and the demand and the supply position in the money market. In India, the emergence of commercial paper has added a new dimension to the money market.
Diagram 2.3 Commercial Paper Issue Mechanism
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Obtained credit rating
Obtained working capital limit
Net worth not less than 4 crores
Issuer Company
Redeem CP on maturity
Issue CP at discount
Investor Bank/Company
Commercial Paper Issue Mechanism Advantage of commercial paper:
High credit ratings fetch a lower cost of capital.
Wide range of maturity provide more flexibility.
It does not create any lien on asset of the company.
Tradability Tradability of Commercial Commercial Paper provides investors with exit options.
Disadvantages of commercial paper:
Its usage is limited to only blue chip companies.
Issuances of Commercial Commercial Paper bring down the bank credit limits.
A high degree of control is exercised on issue of Commercial Paper.
Stand-by-credit may become necessary.
Issuance Process of Commercial Paper:
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In the developed developed economies, economies, a subs substanti tantial al portion portion of working working capital capital requirem requirement ent especially those that are short-term, is promptly met through flotation of commercial paper. Directly accessing market by issuing short-term promissory notes, backed by stand-by or underwriting facilities, enables the corporate to leverage its rating to save on interest costs. Typically commercial commercial paper is sold at a discount to its face value and is redeemed redeemed at face f ace value. Hence, the implict interest rate is function of the size of discount and the period of maturity. Sched Schedule uled d comme commerci rcial al banks banks are major major invest investors ors in comm commer ercia ciall paper paper and their their investment is determined by bank liquidity conditions. Banks prefer commercial paper as an investment avenue rather than sanctioning bank loan. These loans involve high transaction costs and money is locked for a longer time period whereas a commercial paper is an attractive short-term instrument for banks to park funds during times of high liquidity. Some banks fund commercial papers by borrowing from the call money market. Usually, the call money market rates are lower than the commercial paper rates. Hence, banks book profits through arbitraged between between the two money markets. Moreover, the issuance of commercial commercial papers has been generally observed to be invested related to the money market rates.
Illustration 1. 2 2
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X co.ltd issued commercial paper as per following details: Date of issue
17th January, 2009
no. of days
90 days
Date of maturity
17th April, 2009
interest rate
11.25% p.a.
What was the net amount received by the company on issue of commercial paper? Let us assume that the company has issued commercial paper worth Rs.10 crores? No of days days = 90 days Interest rate = 11.25 % p.a. Interest for 90 days = 11.25% p.a. X 90 days/ 365 days = 10 crores X 2.774 / 100+2.774
= 2.774% = Rs. 26, 99,126 crores = or 0.27 crores
Therefore, Therefore, net amount received at the time of issue
= 10 crores – 0.27 crores = Rs. 9.73 crores
RBI Guidelines on Issue of Commercial Paper:
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The summary of RBI guidelines for issue of Commercial paper is given below:
Corporat Corporate, e, primary primary dealers, dealers, satellite satellite dealers dealers and all India India financial financial institut institutions ions are permitted permitted to raise short term finance through issue of commercial paper, which should be within the the umbrella limit limit fixed by by RBI.
A corporate can issue Commercial Paper if: 1. Its tangibl tangiblee net worth worth is not less less than Rs.5 Rs.5 crores crores as per latest latest balance balance sheet. sheet. 2. Working Working capital capital limit limit is obtained obtained from banks/ banks/ all India India financial financial institut institutions, ions, and 3. Its borrowal borrowal account account is classif classified ied as standard standard asset asset by banks/ banks/ all India financi financial al institutions.
Credi Creditt rating rating sho should uld be obtai obtained ned by all eligi eligible ble partic participa ipants nts in cp issue issue from from the specified credit rating agencies like CRISIL, ICRA, CARE, CARE, and FITCH. The minimum rating shall be equivalent to P-2 of CRISIL.
Commercial paper can be issued for maturities between a minimum of 15 days and a maximum of upto one year from the date of issue.
The maturity date of commercial commercial paper should not exceed the date beyond the date upto which credit rating is valid.
It can be issued in denomination denomination of Rs. 5 lakhs or in multiples thereof.
Amount invested invested by a single investor should not be less than Rs. 5 lakhs (face value).
A compan company y can can issue issue comme commerci rcial al paper paper to an aggre aggregat gatee amoun amountt within within the limit limit approved by board of directors or limit specified by credit rating agency, whichever is lower.
Banks and financial institutions have the flexibility to fix working capital limits duly taking into account the resource pattern of company’s financing including commercial papers.
The total amount of commercial paper proposed to be issued should be raised within a period of two two weeks from from the date date on which the issuer opens opens the issue for subscription.
Commercial Commercial paper may be issued on a single date or in parts on different dated provided that in the latter case, each commercial paper shall have the same maturity date.
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Every commercial paper should be reported to RBI through issuing and paying agent (IPA).
Only a scheduled bank can act as an IPA.
Commercial paper can be subscribed by individuals, banking companies, corporate, NRIs and and FIIs.
It can be issued either in the form of a promissory note or in a dematerialised dematerialised form.
It will be issued at a discount to face value as may be determined by the issuer.
Issue of commercial paper should not be underwritten underwritten or co-accepted.
Thee init Th initia iall inve invest stor or in comm commer erci cial al pape paperr shal shalll pay pay the the disc discou ount nted ed valu valuee of the the commercial paper by means of a crossed account payee cheque to the account of the issuer through IPA.
On maturity, if commercial paper is held in physical form, the holder of commercial paper shall present present the investment investment for payment payment to the the issuer through through IPA.
When the commercial paper is held in demat form, the holder of commercial paper will have to get it redeemed through depository and received payment from the IPA.
Commercial paper is issued as a ‘stand alone’ product. It would not be obligatory for banks and financial institutions to provide stand-by facility to issuers of commercial commercial paper.
Every issue of commercial paper, including renewal, should be treated as a fresh issue.
Growth in the Commercial Paper Market:
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INDIAN MONEY MARKET
Commercial paper was introduced in India in January 1990, in pursuance of the Vaghul Committee’s recommendations, in order to enable highly rated non-bank corporate borrowers to diversify their sources of short term borrowings and also provide an additional instrument instrument to investors. commercial paper could carry on an interest rate coupon but is generally sold at a discount. Since commercial paper is freely transferable, banks, financial institutions, insurance companies and others are able to invest their short-term surplus funds in a highly liquid instrument at attractive rates of return.
A major reform to impart a measure of independence to the commercial paper market took took place place when when the ‘stand ‘stand by’ by’ facili facility* ty* of the restora restoratio tion n of the cash credit credit limit and guaranteeing funds to the issuer on maturity of the paper was withdrawn in October 1994. As the reduction in cash credit portion of the MPBF impeded the development of the commercial paper market, the issuance of commercial commercial paper was delinked from the cash credit limit in October 1997. It was converted into a stand alone product from October 2000 so as to enable the issuers of the service sector to meet short-term working capital requirements. requirements.
Banks are allowed to fix working capital limits after taking into account the resource pattern of the companies finances, including commercial commercial papers. Corporates, PDs and all-India financial financial institut institutions ions (FIs) (FIs) under under specifie specified d stipulat stipulations ions have permitte permitted d to raise short-term short-term resources by the Reserve Bank through the issue of commercial papers. There is no lock in period for commercial commercial papers. Furthermore, guidelines were issued permitting investments in commercial commercial papers which has enabled a reduction in transaction cost.
In order order to rationa rationaliz lizee the and standar standardiz dizee wherev wherever er pos possibl sible, e, various various aspect aspectss of processing, settlement and documentation of commercial paper issuance, several measures were undertaken with a view to achieving the settlement on T+1 basis. For further deepening the market, the Reserve Bank of India issued draft guidelines on securitisation of standard assets on April 4, 2005.
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INDIAN MONEY MARKET
Accordingly the reporting of commercial papers issuance by issuing and paying agents (IPAs) on NDS platform commenced effective on April 16, 2005. Activity in the commercial paper market reflects the state of market liquidity as its issuances tend to rise amidst ample liquidity conditions when companies can raise funds through commercial papers at an effective rate of discount lower than the lending rate of bonds. Banks also prefer investing in commercial papers during credit downswing as the commercial paper rate works out higher than the call rate. Table 2.2 shows the trends in commercial papers rates and amounts outstanding.
Table 2.2 – Commercial Papers - Trends in Volumes and Discount Rates. Year Year
Amount Amount Out Outsta standi nding ng at Minimum the end of March (Rs. cr.)
Maximum
Discount Rate (% Discount Rate (% p.a.)
1993-1994 3,264 9.01 1994-1995 604 10.00 1995-1996 76 13.75 1996-1997 646 11.25 1997-1998 1,500 7.65 1998-1999 4,770 8.50 1999-2000 5,663 9.00 2000-2001 5,846 8.20 2001-2002 7,224 7.10 2002-2003 5,749 5.50 2003-2004 9,131 4.60 2004-2005 14,235 4.47 2005-2006 12,718 5.25 2006-2007 17,838 6.25 Sources: RBI, Handbook of Statistics on Indian Economy, 2006-2007
p.a.)
16.25 15.50 20.15 20.90 15.75 15.25 13.00 12.80 13.00 11.10 9.88 7.69 9.25 13.35
Stamp Duty: The dominant investors in CPs are banks, though CPs are also held by financial institutions and corporates. The structure of stamp duties for banks and non-banks is presented in Table 2.3 2 2
INDIAN MONEY MARKET
Table 2.3 Stamp Duty For Banks And Non-Banks Period
Banks
Non-Banks
Past
Present
Past
Present
I. Upto 3 months
0.05
0.012
0.125
0.06
II. Above 3 months upto 6 months
0.10
0.024
0.250
0.12
III. Above 6 months upto 9 months
0.15
0.036
0.375
0.18
IV. Above 9 months upto 12 months
0.20
0.05
0.500
0.25
V. Above 12 months
0.40
0.10
1.00
0.5
Source: RBI, Report of the Group to review guidelines relating to CPs, March 2004.
Certificate of Deposits: Certicate of deposit are unsecured, negotiable, short-term instruments in bearer form, issued by commercial commercial banks and development financial institutions.
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INDIAN MONEY MARKET
The scheme of certificates of Deposits (CDs) was introduced by RBI as a step towards deregulation of interest rates on deposits. Under this scheme, any scheduled commercial banks, co-operative banks excluding land development banks, can issue certificate of deposits for a period of not less than three months and upto a period of not more than one year. The financial institutions specifically authorised by the RBI can issue certificate of deposits for a period not below one year and not above 3 years years duration. Certificate Certificate of deposits, can be issued issued within the period prescribed prescribed for any maturity. maturity. Certific Certificates ates of Deposits Deposits (CDs) (CDs) are short-term short-term borrowings borrowings by banks. banks. Certific Certificate atess of deposits differ from term deposit because they involve the creation of paper, and hence have the facility for transfer and multiple ownerships before maturity. Certificate of deposits rates are usually higher than the term deposit rates, due to the low transactions costs. Banks use the certificates of deposits for borrowing during a credit pick-up, to the extent of shortage in incremental deposits. Most certificates of deposits are held until maturity, and there is limited secondary market activity.
Certificates of Deposit (CDs) is a negotiable money market instrument and issued in dematerialised form or as a Usance Promissory Note, for funds deposited at a bank or other eligible financial institution for a specified time period. Guidelines for issue of certificate of deposits are presently governed by various directives issued by the Reserve Bank of India.
Eligibility for Issue of Certificate of Deposits: Certificate of deposits can be issued by (i) scheduled commercial banks excluding Regio Regional nal Rural Rural Banks Banks (RRB (RRBs) s) and Local Local Area Area Banks Banks (LABs (LABs); ); and (ii) (ii) select select all-Ind all-India ia Financial Institutions that have been permitted by RBI to r aise short -term resources within the umbrella limit fixed by RBI. Bank Bankss have have the the free freedo dom m to issu issuee cert certif ific icat atee of depo deposi sits ts depe depend ndin ing g on thei their r requirements. An FI may issue certificate of deposits within the overall umbrella limit fixed by RBI, i.e., issue of certificate of deposits together with other instruments, viz., term money, term deposits, commercial papers and inter-corporate deposits should not exceed 100 per cent of its net owned funds, as per the latest audited balance sheet. 2 2
INDIAN MONEY MARKET
Denomination For Certificate Of Deposits: Minimum amount of a certificate of deposits should be Rs.1 lakh, i.e., the minimum deposit that could be accepted from a single subscriber should not be less than Rs. 1 lakh and in the multiples of Rs. 1 lakh thereafter. Certificate of deposits can be issued to individuals, corporations, companies, trusts, funds, associations, etc. Non-Resident Indians (NRIs) may also subscribe to certificate of deposits, but only on non-repatriable basis which should be clearly stated on the Certificate. Such certificate of deposits cannot be endorsed to another NRI in the secondary market. market.
Maturity: The maturity period of certificate of deposit’s issued by banks should be not less than 7 days and not more than one year. The FIs can issue certificate of deposits for a period not less than 1 year and not exceeding 3 years from the date of issue.
Discount on Issue of Certificate Of Deposits: Certificate of deposits may be issued at a discount on face value. Banks/FIs are also allowed to issue certificate of deposits on floating rate basis provided the methodology of compiling the floating rate is objective, transparent and market -based. The issuing bank/FI is free to determine the discount/coupon rate. The interest rate on floating rate certificate of deposits would have to be reset periodically in accordance with a pre -determined formula that indicates the spread over a transparent benchmark.
Reserve Requirement and Transferability: Banks have to maintain the appropriate reserve requirements, i.e., cash reserve ratio (CRR) and statutory liquidity ratio (SLR), on the issue price of the certificate of deposits. Physical certificate of deposits are freely transferable by endorsement and delivery. Dematted 2 2
INDIAN MONEY MARKET
certificate of deposits can be transferred as per the procedure applicable to other demat securities. There is no lock-in period for the certificate of deposits. Banks/FIs cannot grant loans against certificate of deposits. Furthermore, they cannot buy- back their own certificate of deposits before maturity
How Certificate Certificate Of Of Deposits Deposits Work: Work: The consumer consumer who opens opens a certifica certificate te of deposits may receive a passbook passbook or paper certificate, but it now is common for a certificate of deposits to consist simply of a book entry and an item shown in the consumer's periodic bank statements; that is, there is usually no "certificate" as such. At mo most st instit instituti utions ons,, the certi certific ficat atee of deposi deposits ts purcha purchase serr can arrang arrangee to have have the interest periodically mailed as a check or transferred into a checking or savings account. This reduces total yield because there is no compounding. Some institutions allow the customer to select this option only at the time the certificate of deposits is opened. Commonly, institutions mail a notice to the certificate of deposits holder shortly before the certificate of deposits matures requesting directions. The notice usually offers the choice of withdrawing withdrawing the principal and accumulated accumulated interest or "rolling it over" (depositing it into a new certificate of deposits). Generally, a "window" is allowed after maturity where the certificate of deposits holder can cash in the certificate of deposits without penalty. In the absence of such dire direct ctio ions, ns, it is comm common on for for the the inst instit itut utio ion n to "rol "rolll over over"" the the cert certif ific icat atee of depo deposi sits ts automatically, once again tying up the money for a period of time (though the certificate of deposits holder may be able to specify at the time the certificate of deposits is opened that it is not to be automatically automatically rolled over).
RBI Guidelines on issue of Certificate of Deposits: The salient features of scheme devised by RBI in issue of certificates of deposit (CDs) by banks are as follows:
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INDIAN MONEY MARKET
Certific Certificate ate of deposits deposits can be issued issued only by schedule scheduled d commer commercial cial banks. banks. Regional Regional rural banks are not eligible for issue of certificate of deposits.
The minimum deposit that cab be accepted from a single subscriber should be Rs. 5 lakhs. Above that, it should be in multiples of Rs. 1 lakhs.
Certificate of deposits can be issued to individuals, corporations, companies, trusts, funds, associations etc. NRIs can subscribe to certificate of deposits only on nonrepatriable basis.
The minimum maturity maturity period of certificate of depositss is 15 days.
Certificate of depositss should be issued at a discount on face value. The issuing bank is free to determine the discount rate.
As the certificates of depositss are usance promissory notes, stamp duty would be attracted as per provisions if Indian Stamp Act.
The issuing banks have to maintain CRR and SLR on the issue price of certificate of deposits.
certificate of deposits are freely transferable by endorsement and delivery.
Banks cannot grant loan against security of certificate of deposits.
Banks cannot buyback their own certificate of deposits before maturity.
certificate of deposits should be issued only in demat form.
Rating of the certificate of deposit is not mandatory/ compulsory. compulsory.
Certificate Of Deposits – Volume And Rates:
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Table Table 3.1 shows the trends in rates and volume outstanding outstanding of certificate certificate of deposits. deposits. Banks and financial institutions are the largest issuers of certificate of deposits, and are also subscribers to the certificate of deposits deposits of one another. There are limited other other investors such as mutual funds, in the certificate of deposit markets. Scheduled commercial banks rely on certificate of deposits to supplement their deposit resources to fund the credit demand. The flexibility of timing and return that can be offered for attracting bulk deposits has made certificate of deposits the preferred route for mobilizing resources by some banks. Table 3.1 certificate of deposits – Volume and Rates
Year
Amount Amount Outstan Outstanding ding at the end Minimum rate Maxim Maximum um rate rate (% of March (Rs. cr.)
(% p.a.)
p.a.)
1993-1994 5,571 7.00 18.00 1994-1995 8,017 7.00 15.00 1995-1996 16,316 9.00 23.00 1996-1997 12,134 7.00 21.00 1997-1998 14,296 5.00 37.00 1998-1999 3,717 6.00 26.00 1999-2000 1,227 6.25 14.20 2000-2001 771 5.00 14.60 2001-2002 1,576 5.00 11.50 2002-2003 908 3.00 10.88 2003-2004 4,461 3.57 7.40 2004-2005 12,078 1.09 7.00 2005-2006 43,568 4.10 8.94 2006-2007 93,272 4.35 11.90 Source: Handbook of Statistics on the Indian Economy Economy 2002-03, RBI & RBI Bulletin.
Call Money Market: Call and notice money market refers to the market for short -term funds ranging from overnight funds to funds for a maximum tenor of 14 days. Under Call money market, funds are transacted on overnight basis and under notice money market, funds are transacted for the period of 2 days to 14 days. 2 2
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The call/notice money market is an important segment of the Indian Money Market. This is because, any change in demand and supply of short-term funds in the financial system is quickly reflected in call money rates. The RBI makes use of this market for conducting the open market operations effectively. Participants in call/notice money market currently include banks (excluding RRBs) and Primary dealers both as borrowers and lenders. Non Bank institutions are not permitted in the call/notice money market with effect from August August 6, 2005. The regulator has prescribed limits on the banks and primary dealers operation in the call/notice money market. Call money market is for very short term funds, known as money on call. The rate at which funds are borrowed in this market is called `Call Money rate'. The size of the market for these funds in India is between Rs 60,000 million to Rs 70,000 million, of which public sector banks account for 80% of borrowings and foreign banks/private sector banks account for the balance 20%. Non-bank financial institutions like IDBI, LIC, and GIC etc participate only as lenders in this market. 80% of the requirement of call money funds is met by the non-bank participants and and 20% from the banking system. system. In pursuance of the announcement made in the Annual Policy Statement of April 2006, an electronic screen-based negotiated quote-driven system for all dealings in call/notice and term money market was operationalised with effect from September 18, 2006. This system has been developed by Clearing Corporation of India Ltd. on behalf of the Reserve Bank of India. The NDS -CALL system provides an electronic dealing platform with features like Direct one to one negotiation, real time quote and trade information, preferred counterparty setup, online exposure limit monitoring, online regulatory limit monitoring, dealing in call, notice and term money, dealing facilitated for T+0 settlement type for Call Money and dealing facilitated for T+0 and T+1 settlement type for Notice and Term Money. Information on previous dealt rates, ongoing bids/offers on re al time basis imparts greater transparency and facilitates better rate discovery in the call money market. The system has also helped to improve the ease of transactions, increased operational efficiency and resolve problems associated with asymmetry of information. However, participation on this platform is optional and currently both the electronic platform and the telephonic market are co-existing. After the introduction of NDSCALL, market participants have increasingly started using this new system more so during times of high volatility in call rates.
2 2
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Volumes in the Call Money Market: Call markets represent the most active segment of the money markets. Though the demand for funds in the call market is mainly governed by the banks' need for resources to meet their statutory reserve requirements, it also offers to some participants a regular funding source sou rce for building building up sho short rt -term assets. assets.
Howe However ver,, the demand demand for funds funds for reserve reserve
requirements dominates any other demand in the market.. Figure 4.1 displays the average daily volumes in the call markets.
Figure 4.2: Average Daily Volumes in the Call Market (Rs. cr.) Committee Recommendation on Call Money Market: There are various committee suggested recommendation on Call Money Market are as follow: The Sukhumoy Chakravarty Committee:
The call money market for India was first recommended by the Sukhumoy Chakravarty Committee, which was set up in 1982 to review the working of the monetary system. They felt that that allowi allowing ng additi additiona onall non-ban non-bank k partic participan ipants ts into into the call call market market would would not dilute dilute the strength of monetary regulation by the RBI, as resources from non-bank participants do not
represent any additional resource for the system as a whole, and their participation in call 2 2
INDIAN MONEY MARKET
money market would only imply a redistribution of existing resources from one participant to another. another. In view of this, the Chakravart Chakravarty y Committe Committeee recommende recommended d that additional non-bank participants may be allowed to participate in call money money market. The Vaghul Committee Report:
The Vaghul Committee (1990), while recommending the introduction of a number of money market instruments to broaden and deepen the money market, recommended that the call markets should be restricted to banks. The other participants could choose from the new money mon ey market market instrume instruments, nts, for their short -term -term require requiremen ments. ts.
One of the reasons reasons the
committee ascribed to keeping the call markets as pure inter-bank markets was the distortions that would arise in an environment where deposit rates were regulated, while call rates were market determined. The Narasimham Committee II Report:
The Narasimham Committee Committee II (1998) also recommended that call money market in India, like in most other developed markets, should be strictly restricted to banks and primary dealers. Since non- bank participants participants are not subject to reserve reserve requireme requirements, nts, the Committe Committeee felt that such participants should use the other money market instruments, and move out of the call markets. Following the recommendations of the Reserve Banks Internal Working Group (1997) and the Narasimhan Committee Committee (1998), steps steps were taken to reform the call money market by transforming it into a pure inter bank market in a phased manner. The non-banks exit was implemented in four stages beginning May 2001 whereby limits on lending by non-banks were progressively reduced along with the operationalisation of negotiated dealing system (NDS) and CCIL until their complete withdrawal in August 2005. In order to create avenues for deployment of funds by non-banks following their phased exit from the call money market, several new instruments were created such as market repos and CBLO. Various reform measures have imparted stability to the call money market. With the transformation of the call money market into a pure inter-bank market, the turnover in the call/n call/notic oticee mon money ey market market has decline declined d signifi significan cantly tly.. The activit activity y has migrat migrated ed to other other overnight collateralized market segments such as market repo and CBLO.
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Participants in the Call Money Market: Participants in call money market include the following:
As lenders and borrowers: Banks and institutions such as commercial banks, both
Indian and foreign, State Bank of India, Cooperative Banks, Discount and Finance House of India ltd. (DFHL) and Securities Trading Corporation of India (STCI).
As lenders: Life Insurance Corporation of India (LIC), Unit Trust of India (UTI),
General Insurance Corporation (GIC), Industrial Development Bank of India (IDBI), National Bank for Agriculture and Rural Development Development (NABARD (NABARD), ), specified institutions
already
operating
in
bills
rediscounting
market,
and
entities/corporates/mutual entities/corporates/mutual funds. The participants in the call markets increased in the 1990s, with a gradual opening up of the call markets to non-bank entities. Initially DFHI DFHI was the only PD eligible to participate in the call market, with other PDs having to route their transactions through DFHI, and subseq sub sequen uently tly STCI. STCI. In 1996, PDs apart apart from from DFHI DFHI and STCI STCI were were allowed allowed to lend lend and borrow directly in the th e call markets. Presently there are 18 primary dealers participating in the call markets. Then from 1991 onwards, corporates were allowed to lend in the call markets, initially initially through through the DFHI, DFHI, and later through through any of the PDs. In order to be able to lend, lend, corporates had to provide proof of bulk lendable resources to the RBI and were not suppose to have any outstanding borrowings with the banking system. The minimum amount corporates had to lend was reduced from Rs. 20 crore, in a phased manner to Rs. Rs. 3 crore in 1998. There were 50 corporate corporatess eligible eligible to lend in the the call markets markets,, through through the primary primary dealers. dealers. The corporates which were allowed to route their transactions through PDs, were phased out by end June 2001.
Table 4.2: Number of Participants in Call/Notice Money Market Category Bank PD FI MF Corporate Total I. Borrower 154 19 173 II. Lender 154 19 20 35 50 277 Source: Report of the Technical Group on Phasing Out of Non-banks from Call/Notice Money
Market, March 2001. 2 2
INDIAN MONEY MARKET
Banks and PDs technically can operate on both sides of the call market, though in reality, only the P Ds borrow and lend in the call markets. The bank participants are divided into two categories: banks which are prepre- dominantly lenders (mostly (mostly the public sector banks) and banks which are pre- dominantly borrowers (foreign and private sector banks). Currently, the participants in the call/notice money market currently include banks (excluding RRBs) and Primary Dealers (PDs) both as borrowers and lenders.
Call Money Rates: Thee rate Th rate of inte intere rest st on call call fund fundss is call called ed mo mone ney y rate rate.. Call Call mo mone ney y rate ratess are are characteristics in that they are found to be having seasonal and daily variations requiring intervention by RBI and other institutions. The concentration in the borrowing and lending side of the call markets impacts liquidity liquidity in the call call markets. markets.
The presence presence or absence absence of of important important players players is a significa significant nt
influen influence ce on quantit quantity y as well well as price. price. This This leads to a lack lack of depth depth and high levels levels of volatility in call rates, when the participant structure on the lending or borrowing side alters. Short-term Short-term liquidity liquidity conditions impact the call rates the most. most. On the supply side the call rates are influenced by factors such as: deposit mobilization of banks, capital flows, and and on the the dema demand nd side side,, call call rate ratess are are influ influen ence ced d by tax banks banks reserve reserve requiremen requirements ts ; and outflows, government borrowing programme, seasonal fluctuations in credit off take. The external situation and the behaviour of exchange rates also have an influence on call rates,
as most players players in this market run integrated integrated treasuries treasuries that hold short term positions in both rupee and forex markets, deploying and borrowing funds through call markets. Table 4.3: Call Money Rates
year
Maximum
Minimum
Average
Bank
Year
(% p.a.)
(% p.a.)
(% p.a.)
March) (% p.a.)
14.6 52.2
1.05 0.2
7.8 8.7
12.0 10.5
1996 - 97 1997 - 98
rate
(End
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INDIAN MONEY MARKET
1998 - 99 20.2 3.6 7.8 1999 - 00 35.0 0.1 8.9 2000 - 01 35.0 0.2 9.2 2001 - 02 22.0 3.6 7.2 2002 - 03 20.00 0.50 5.89 2003 -04 12.00 1.00 4.62 2004 - 05 10.95 0.6 4.65 Source: Handbook of Statistics on Indian Economy, 2006-07, RBI
8.0 8.0 7.0 6.5 6.25 6.00 6.00
During normal times, call rates hover in a range between the repo rate and the reverse repo repo rate. rate. Th Thee repo repo rate rate repres represent entss an avenue avenue for parking parking short -term -term funds, funds, and during during periods of easy liquidity, call rates are only slightly above the repo rates. During periods of tight liquidity, call rates move towards the reverse repo rate. Table 4.3 provides data on the behaviour of call rates. Figure 4.3displays the trend of average monthly monthly call rates. The behaviour behaviour of call rates has historically historically been influenced influenced by liquidity liquidity conditions in the market. Call rates touched a peak of about 35% in May 1992, reflecting tight liquidity on account of high levels of statutory pre-emptions and withdrawal of all refinance facilities, barring export credit refinance. Call rates again came under pressure in November 1995 when the rates were 35% par.
Repurchase Agreement (Repo): Thee major Th major function function of the money money marke markett is to provid providee liquid liquidity ity.. To achiev achievee this this function and to even out liquidity changes, the Reserve Bank uses repos. Repo is a useful money market instrument enabling the smooth adjustment of short-term liquidity among varied market participants such as banks, financial institutions and so on. Repo is a money market instrument, which enables collateralized short term borrowing and lending through sale/purchase operations in debt instruments. Under a repo transaction, a hold holder er of secu securi riti ties es sell sellss the them to an inve invest stor or with with an agre agreem emen entt to repu repurc rcha hase se at a predetermined date and rate. It is a temporary sale of debt involving full transfer transf er of ownership of the securities, that is, the assignment of voting and financial rights. Repo is also referred to as a ready forward transaction as it is a means of funding by selling selling a security security held on a spot basis and repurchasing repurchasing the same on a forward basis. Though Though there is no restriction on the maximum period for which repos can be undertaken, generally, repos are done for a period not exceeding 14 days. Different instruments can be considered as 2 2
INDIAN MONEY MARKET
collateral security for undertaking the ready forward deals and they include Government dated securities, treasury bills. In a typical repo transaction, the counter-parties agree to exchange securities and cash, with a simultaneous agreement agreement to reverse the transactions after a given given period. To the lender of cash, the securities lent by the borrower serves as the collateral; to the lender of securities, the cash borrowed by the lender lender serves as the collateral. Repo thus represents a collateralized collateralized short term lending. lending. The lender lender of securities securities (who is also the borrower of cash) is said to be doing the repo; the same transaction is a reverse repo in the books of lender of cash (who is also the borrower of securities).
Reserve Repos: A reverse repo is the mirror image of a repo. For, in a reverse repo, securities are acquired with a simultaneous commitment to resell. Hence whether a transaction is a repo or a reverse repo is determined only in terms of who initiated the first leg of the transaction. When the reverse repurchase transaction matures, the counter- party returns the security to the entity concerned concerned and receives receives its cash along with a profit spread. spread. One factor factor which encourages encourages an organization to enter into reverse repo is that it earns some extra income on its otherwise idle cash. The difference between the price at which the securities are bought and sold is the lender’s profit or interest earned for lending the money. The transaction combines elements of both a securities purchased/sale purchased/sale operation and also a money market borrowing/lending borrowing/lending operation.
Importance of Repos:
Interest Rate: being collateralized loans, repos help reduce counter-party risk and
therefore, fetch a low interest rate especially in a volatile market.
Safety: repo is an almost risk-free instrument used to even-out liquidity changes in the
system. Repos offer safe short-term outlet for temporary excess cash at close to market interest rates. 2 2
INDIAN MONEY MARKET
low-risk sk and flexib flexible le sho shortrt-ter term m instru instrume ments nts,, repos repos are used used to financ financee Uses: As low-ri securities held in trading and investment account of security dealers, to establish short positions, to implement implement arbitrage activities besides meeting specific customer needs. They offer low-cost investment opportunities with combination of yield and liquidity. In India, repo transactions are basically fund management/statutory liquidity reserve (SLR) management devices used by banks.
Cash Management Tool: the repo arrangement essentially serves as a short-term cash
management tool as the bank receives cash from the buyer in return for the securities. This helps the banks to meet temporary cash requirements. This also makes the repos a pure money lending operation. On maturity of repos, the security is purchased back by the seller of the securities.
Liquidity Control: The RBI uses repos as a tool of liquidity control for absorbing
surplus liquidity from the banking system in a flexible way and there preventing interest rate arbitraging. All repo transactions are to be affected at Mumbai only and the deals are to be necessarily put through the subsidiary general ledger (SGL) account with the Reserve Bank of India.
Repo Rate: Repo rate is nothing but the annualised interest rate for the funds transferred by the lender lender to the borrower. borrower. Generally, Generally, the rate at which it is possible to borrow through through a repo is lower than the same offered on unsecured (or clean) inter-bank loan for the reason that it is a collateralized transaction and the credit worthiness of the issuer of the security is often higher than the seller. Other factors affecting the repo rate include the credit worthiness of the borrower, liquidity of the collateral and comparable rates rates of other money market instruments. In a repo transaction, there are two legs of transactions viz. selling of the security and repurchasing repurchasing of the same. same. In the first leg of the transaction transaction which which is for a nearer nearer date, sale price is usually based on the prevailing market price for outright deals. In the second leg, which is for a future date, the price is structured based on the funds flow of interest and tax elements of funds exchanged. This is on account of two factors. First, as the ownership of securities passes on from seller to buyer for the repo period, legally the coupon interest accrued accrued for the period has to be passed on to the buyer. Thus, Thus, at the sale leg, while the buyer of security is required to pay the accrued coupon interest for the broken period, at the 2 2
INDIAN MONEY MARKET
repurchase leg, the initial seller is required to pay the accrued interest for the broken period to the initial buyer. Generally, norms are laid down for accounting of repos and valuation of collateral are concer concerned ned.. While While there there are standa standard rd account accounting ing norms, norms, gener generall ally y the securit securities ies used used as collateral in repo transactions are valued at current market price plus accrued interest (on coupon bearing securities) calculated to the maturity date of the agreement less "margin" or "haircut". The haircut is to take care of market risk and it protects either the borrower or lender depending upon how the transaction is priced. The size of the haircut will depend on the repo period, risky ness of the securities involved and the coupon rate of the underlying securities. Since fluctuations in market prices of securities would be a concern for both the lender as well as the borrower borrower it is a common common practice practice to reflect the changes changes in market price by resorting to marking to market. Thus, if the market value of the repo securities decline beyond a point the borrower may be asked to provide additional collateral to cover the loan. On the other hand, if the market value of collateral rises substantially, the lender may be required to return the excess collateral to the borrower.
CALCULATING SETTLEMENT AMOUNTS IN REPO TRANSACTIONS:
Repo Repo transacti transactions ons involve involve 2 legs: legs: the first first one when when the repo repo amount amount is receive received d by the borrower, and the second, which involves repayment of the borrowing.
The settlement
amount for the first leg consists of: a. Value of securities at the transaction price b. Accrued interest from the previous coupon date to the the date on which the first leg is settled. The settlement amount for the second leg consists of: a. Repo interest at the agreed rate, for the period of the repo transaction b. Return of principal amount borrowed. borrowed.
2 2
INDIAN MONEY MARKET
CALCULATING SETTLEMENT AMOUNTS IN REPO TRANSACTIONS:
Security offered under Repo
11.43% 2015
Coupon payment dates
7 August and 7 February
Market Price of the security offered Rs.113.00
(1)
under Repo (i.e. price of the security in the first leg) Date of the Repo
19 January, 2003
Repo interest rate
7.75%
Tenor of the repo
3 days
Broken period interest for the first 11.43%x162/360x100=5.1435
(2)
leg* Cash consideration for the first leg
(1) + (2) = 118.1435
(3)
Repo interest**
118.1435x3/365x7.75%=0 118.1435x3/365x7.75%=0.0753 .0753
(4)
Broken period interest for the second 11.43% x 165/360x100=5.2388 165/360x100=5.2388 leg Price for the second leg
(5)
(3) + (4)-(5) = 118.1435 + 0.0753 - 5.2388 (6)
= 112.98 Cash Cash consi conside derat ration ion for the secon second d (5) + (6) = 112.98 + 5.2388 = 118.2188
(7)
leg 2 2
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Repo Market in India: Some Recent Issues: Repos being short term money market instruments are necessarily being used for smoothening smoothening volatil volatility ity in money money market market rates rates by central central banks banks through through injection injection of
short
term term liquidi liquidity ty into into the marke markett as well well as absorb absorbing ing excess excess liquidi liquidity ty fro m the sys system tem.. Regulation of the repo market thus becomes a direct responsibility of RBI. Accordingly, RBI has been concerned with use of repo as an instrument by banks or non-bank entities and issues relating to type of eligible instruments for undertaking repo, eligibility of participants to unde undert rtake ake such such tran transa sact ctio ions ns etc. etc. and and it has has been been issu issuing ing inst instru ruct ctio ions ns in this this rega regard rd in consultation with the the Central Government. Government. After evidence of abuse in the repo market market during the period leading to the securities scam of 1992, 1992, RBI had banned repos from the markets. It is only in the recent past that these restrictions have been removed, and after the acceptance of the report of the technical sub-group’s recommendations, RBI has initiated efforts for creating an active market for repos. It was decided to adopt the the international usage of the term ‘Repo’ and ‘Reverse Repo’ under LAF operations. operations. Thus, Thus, when RBI absorbs liquidity liquidity it is termed termed as Reverse Repo and the the RBI injecting liquidity is the repo operation. operation. Since forward trading in securities was generally prohibited in India, repos were permitted under regulated conditions in terms terms of partic participa ipants nts and instru instrume ments. nts. Reform Reformss in this this marke markett has encom encompas passed sed both both institutions and instruments. Both banks and non-banks were allowed in the market. All government government securities securities and PSU bonds were eligible for repos till April 1988. Between Between April 1988 and mid June 1992, only inter- bank repos were allowed in all government securities. Double ready forward transactions were part of the repos market throughout the period. Subsequent to the irregularities in securities transactions that surfaced in April 1992, repos 2 2
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were banned in all securities, except Treasury Bills, while double ready forward transactions were prohibited altogether. Repos were permitted only among banks and PDs. In order to reactivate the repos market, market, the Reserve Bank gradually gradually extended extended repos facility to all Central Central Government Government dated securities, Treasury Bills and State Government securities. It is mandatory to actually hold the securities in the portfolio before undertaking repo operations. In order to activate the repo market and promote transparency , the Reserve Bank introduced regulatory safeguards such as delivery versus payment system during 1995-96. The Reserve Bank allowed all non-bank entities maintaining subsidiary general ledger (SGL) account to participate in this money market market segmen segment. t. Furthe Furthermo rmore, re, NBFC NBFCs, s, mutual mutual funds, funds, hou housin sing g finance finance compan companies ies and insura insurance nce compani companies es not holding holding SGL account accountss were were allowe allowed d by the Reser Reserve ve Bank Bank to undertake repo transactions from March 2003 through their ‘gilt accounts’ maintained with custodians. With the increasing use of repos in the wake of phased exit of non-banks from the call money market, the Reserve Bank issued comprehensive uniform accounting guidelines as well as documentation policy in March 2003. Moreover, the DVP III mode of settlement in government securities (which involves settlement of securities and funds on a net basis) in April 2004 facilitated the introduction of rollover of repo transactions in government securities and provided flexibility to market participants in managing their collaterals.
Secondary Market Transaction in Repos: Secondary market repo transactions are settled through the RBI SGL accounts, and weekly weekly data is available available from the RBI on volumes, volumes, rates rates and number of days. Though Though the NSE WDM also has the facility for reporting repo trades, there were no repo transactions recorded during 2005- 06, 2006-07 and 2007-08.
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Commercial bill market: Commercial bill is a short term, negotiable, and self-liquidating instrument with low risk. It enhances he liability to make payment in a fixed date when goods are bought on credit. Accor According ding to the Indian Indian Negot Negotiab iable le Instru Instrume ments nts Act, Act, 188 1881, 1, bill bill or exchan exchange ge is a writt written en instrument containing an unconditional order, signed by the maker, directing to pay a certain amount of money only to a particular person, or to the bearer of the instrument. Bills of exchange are negotiable instruments drawn by the seller (drawer) on the buyer (drawee) or the value of the goods delivered to him. Such bills are called trade bills. When trade bills are accepted by commercial banks, they are called commercial commercial bills. The bank discount this bill by keeping a certain margin and credits the proceeds. Banks, when in need of money, can also get such bills rediscounted by financial institutions such as LIC, UTI, GIC, ICICI and IRBI. The maturity period of the bills varies from 30 days, 60 days or 90 days, depending on the credit extended in the industry.
Types of Commercial Bills: Commercial bill is an important tool finance credit sales. It may be a demand bill or a demand nd bill bill is paya payabl blee on dema demand nd,, that that is imme immedi diat atel ely y at sigh sightt or on usance usance bill. A dema presentation by the drawee. A usance bill is payable after a specified time. If the seller wishes to give sometime for payment, the bill would be payable at a future date. These bills can either be clean bills or documentary documentary bills. In a clean bill, documents are enclosed and delivered against acceptance by drawee, after which it becomes clear. In the case of a documentary bill, documents are delivered against payment accepted by the drawee and documents of bill are filed by bankers till the bill is paid. 2 2
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Commercial Commercial bills can be inland bills or foreign bills . Inland bills must (1) be drawn or made in India and must be payable in India: India: or (2) drawn upon any person resident resident in India. Foreign bills, on the other hand, are (1) drawn outside India and may be payable and by a party outside India, or may be payable in India or drawn on a party in India or (2) it may be drawn in India and made payable outside India. A related classification of bills is export bills and import bills. While export bills are drawn by exporters in any country outside India, import bills are drawn on importers in India by exporters abroad. The indigenous variety of bill of exchange for financing the movement of agricultural produce, called a ‘hundi’ has a long tradition of use in India. It is vogue among indigenous bankers for raising money or remitting funds or to finance inland trade. A hundi h undi is an important instrument in India; India; so indige indigenou nouss banke bankers rs dom domina inate te the bill bill marke market. t. Howe However ver,, with with refor reforms ms in the financial system and lack of availability of funds from private sources, the role of indigenous bankers is declining. declining. With a view to eliminating movement movement of papers and facilitating multiple rediscounting, rediscounting, RBI introduced an innovation instruments known as ‘Derivative Usance Promissory Notes,’ backed by such eligible commercial commercial bills for required amounts and usance period (up to 90 days). Government has exempted stamp duty on derivative usance promissory notes. This has simplified and streamlined bill rediscounting by institutions and made the commercial bill an active active instru instrume ment nt in the second secondary ary mo money ney marke market. t. Th This is instru instrume ment, nt, being being a negoti negotiabl ablee instrument issued by banks, is a sound investment for rediscounting institutions. Moreover rediscounting institutions can further discount the bills anytime prior to the date of maturity. Since some banks were using the facility of rediscounting commercial bills and derivative usance promissory notes of as short a period as one day, the Reserve Bank restricted such redis rediscou counti nting ng to a minim minimum um period period of 15 days. days. Th Thee eligi eligibil bility ity crite criteria ria prescr prescribe ibed d by the Reserve Bank for rediscounting commercial bills are that the bill should arise out of a genuine commercial transaction showing evidence of sale of goods and the maturity date of the bill should to exceed 90 days from the date of rediscounting. Commercial bills can be traded by offering the bills for rediscounting. Banks provide credit to their customers by discounting commercial bills. This credit is repayable on maturity of the bill. In case of need for funds, and can rediscount the bills in the money market and get ready money. Commercial bills ensure improved quality of lending, liquidity and efficiency in 2 2
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money management. It is fully secured for investment since it is transferable by endorsement and delivery and it has high degree of liquidity. The bills market is highly developed in industrial countries but it is very limited in India. Commercial bills rediscounted by commercial banks with financial institutions amount to less than Rs 1,000 crore. In India, the bill market did not develop due to (1) the cash credit system of credit delivery where the onus of cash management rest with banks and (2) an absence of an active secondary market.
Measures to Develop the Bills Market: One of the objectives of the Reserve Bank in setting up the Discount and finance House of India was to develop commercial commercial bills market. The bank sanctioned a refinance limit for the DFHI DFHI against collateral of treasury bills and against the holdings of eligible commercial commercial bills. With a view to developing the bills market, the interest rate ceiling of 12.5 per cent on rediscounting of commercial bills was withdrawn from May 1, 1989. To develop the bills market, the Securities and Exchange Board of India (SEBI) allowed, in 1995-96, 14 mutual funds to participate as lenders in the bills rediscounting market. During 1996-97, seven more mutual funds were permitted to participate in this market as lenders while another four primary dealers were allowed to participate as both lenders and borrowers. borrowers. In order to encourage the ‘bills’ culture, the Reserve Bank advised banks in October 1997 to ensure that at least 25 percent p ercent of inland credit purchases of borrowers be through bills.
Size of the Commercial Bills Market: The size of the commercial market is reflected in the outstanding amount of commercial bills discounted discounted by banks with with various financial financial institutions. institutions. The share of bill finance in the total bank credit increased from 1993-94 to 1995-96 but declined declined subsequently. subsequently. This reflects reflects the underdev underdevelopm elopment ent state of the bills bills market. market. The reasons for the underdevelopment are as follows:
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The Reserve Bank made an attempt to promote the development of the bill market by redis rediscou counti nting ng facili facilitie tiess with with it self self till till 197 1974. 4. Th Then, en, in the beginn beginning ing of the 198 1980s 0s,, the availability of funds from the Reserve Bank under the bill rediscounting scheme was put on a discretionary basis. It was altogether stopped in 1981. The popularity of the bill of exchange as a credit instrument depends upon the availability of acceptance sources of the central bank as it is the ultimate source of cash in times of a shortage of funds. However, it is not so in India. The Reserve Bank set up the DFHI to deal in this instrument and extends refinance facility to it. Even then, the business in commercial commercial bills has declined drastically as DFHI concentrates more on other money market instruments such as call money and treasury bills. It is mostly foreign trade that is financed through the bills market. The size of this market is small because the share of foreign trade in national income is small. Moreover, export and import bills are still drawn in foreign currency which has restricted their scope of negotiation. n egotiation. A large part of the bills discounted by banks are not genuine. They are bills created by converting the cash-credit/overdraft accounts of their customers. customers. The system of cash-credit and overdraft from banks is cheaper and more convenient than bill fina financ ncin ing g as the the proc proced edur ures es for for disc discou ount nting ing and and redi redisc scou ount nting ing are are comp comple lex x and and time time consuming. This market was highly misused in the early 1990s by banks and finance companies which refinanced it at times when it could to be refinanced. This led to channeling of money into undesirable uses. The development of bills discounting as a financial service depends upon the existence of a full fledged bill market. The Reserve Bank of India (RBI) has constantly endeavored to develop the commercial bills market. Several committees set up to examine the system of bank financing, and the money market had strongly recommended recommended a gradual shift to bills finance and phase out of the cash credit system. The most notable of these were: (1) Dehejia Committee, 1969, (2) Tandon Committee, 1974, (3) Chore Committee, 1980 and (4) Vaghul Committee, 1985 1985.T .This his sect sectio ion n brie briefl fly y outl outline iness the the effo effort rtss made made by the the RBI RBI in the the dire direct ctio ion n of the the development development of a full fledged bill market.
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Bill Market Scheme, 1952 : The salient features of the scheme were as follows: (1) The schemes was announced under section 17(4)(c) of RBI Act enables it to make advances to scheduled banks against the security of issuance of promissory notes or bills drawn on and payable in India and arising out of bonafide commercial commercial or trade transaction bearing two or more good signatures one of which should be that of scheduled bank and maturing within 90 days from the date of advances.
(2) The schedule scheduled d banks banks were were required required to convert convert a portion portion of the demand promissory promissory notes obtained by them, from their constituents in respect of loans/overdrafts loans/overdrafts and cash credits granted to them into usance promissory notes maturing within 90 days, to be able to avail of refinance under the scheme;
(3) The existing loan, cash credit or overdraft accounts were, therefore, required to be split up into two parts viz., (A) one part was to remain covered by the demand promissory notes, in this account further withdrawals or repayments were as usual being permitted. (B) the other part, which would represent the minimum requirement of the borrower during the next three months would be converted into usance promissory notes maturing within ninety days. (4) This procedure did not bring any change in offering the same facilities as offered before by the banks to their constituents. Banks could lodge the usance promissory notes with the RBI for advances as eligible security for borrowing so as to replenish their loanable funds.
(5) The amount advanced by the RBI was not to exceed the amount lent by the scheduled banks to the respective borrowers.
(6) The scheduled bank applying for accommodation had to certify that the paper presented by 2 2
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it as coll collat ater eral al aros arosee out out of bona bona fide fide comm commer erci cial al tran transa sact ctio ions ns and and that that the the part party y was was creditworthy.
Bill Market Scheme, 1970: In pursuance of the recommendations of the Dehejia Committee, the RBI constituted a working group to evolve a scheme to enlarge the use of bills. Based on the scheme suggested by the study group, group, the RBI RBI introduced, introduced, with effect effect from November November 1, 1970 the new bill market market scheme in order to facilitate the re-discounting of eligible bills of exchange by banks with it. To popularize the use of bills, the scope of the scheme was enlarged, the number of participants was increased, and the procedure was simplified over the years.
The salient features of the scheme: Eligible Institutions: All licensed scheduled banks and those which do not require a license
(i.e. the State Bank of India, its associate banks and nationalized banks) are eligible to offer bills of exchange to the RBI for rediscount. There is no objection to a bill, accepted by such banks, being purchased by others banks and financial institutions but the RBI rediscounts only those bills as are offered to it by an eligible bank. Eligibility of Bills: The eligibility of bills offered under the scheme to the RBI is determined
by the statutory provisions embodied in section 17(2)(a) of the Reserve Bank of India Act, which authorize the purchase, sale and rediscount of bills of exchange and promissory notes, drawn on and payable in India and arising out of bona fide commercial or trade transactions, bearing two or more good signatures one of the which should be that of a scheduled bank or a state cooperative bank ands maturing: 1) In the case case of bills bills of exchange and promissory promissory notes notes arising out of any such such transaction transaction relating to the export of goods from India, within one hundred and eighty days. 2) In any other other case, within within ninety ninety days from the the date of purchase purchase or redisco rediscount unt exclusive exclusive of days of grace; 3) The scheme scheme is confine confined d to genuine genuine trade bills bills arising arising out of genuine genuine sale sale of goods. goods. The bill should normally have a maturity maturity of not more than 90 days. A bill having a maturity 2 2
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of 90 to 120 days is also eligible for rediscount, provided at the time of offering to the RBI for rediscount it has a usance not exceeding 90 days. The bills presented for redis rediscou count nt sho should uld bear bear at least least two two goo good d signat signature ures. s. Th Thee signat signature ure of a licens licensed ed scheduled bank is treated as a good signature; 4) Bill of exchange arising arising out of the sale sale of commoditie commoditiess covered by by the selective selective credit credit control directives of the RBI has been excluded from the scope of the scheme, to facilitate the selective credit controls and to keep a watch on the level of outstanding credit against the affected commodities. commodities.
Procedure For Rediscounting of Commercial Bill: Eligible banks are required to apply to the RBI in the prescribed form, giving their estim estimate ated d requi requirem rement entss for the 12 mo month nthss ending ending Octob October er of each each year, year, and limits limits are sanctioned / renewed for a period of one year running from 1st November to 31st October of the following year. The RBI presents for payment, bills of exchange rediscounted by it and such bills have to taken delivery of by the rediscounting banks against payment, not less than three working days before the dates of maturity of the bills concerned. In case the bills are retired before the dates, pro-rata refund of discount is allowed by the RBI.
For rediscounting purposes, bills already rediscounted with the RBI may be lodged with it. The unexpired period of the usance of the bills so offered should not be less than 30 days and the bills should to bear the endorsement of the discounting bank in favor of a party other than the RBI.
Banks to hold Bills rediscount: In the first year of operation of the scheme, the banks were were requ requir ired ed to lodg lodgee all all elig eligib ible le bill billss with with the the RBI RBI for for avai availi ling ng them themse selv lves es of the the rediscounting facilities. In November 1971, actual lodgment of bills of the face value of Rs 2 lakh and below was dispensed with and the banks were authorized to hold such bills with themselves. This limit was increased to Rs10 lakh in November 1973. The banks are required to make declarations to the effect that they hold eligible bills of a particular aggregate aggregate value on 2 2
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behalf of the RBI as its agents, and on this basis the RBI pays to them the discounted value of such bills. The discounting banks are also required to endorse such bills in favor of the RBI before including them in the declarations and also re-endorse the bills in their own favor when they are retired. Since 1975, banks are permitted to rediscount bills with other commercial banks as well as certain other approved financial institutions. Since June, 1977, there is a ceiling on the rate of rediscount on such bills which has been varied by the banks from time to time.
The bills rediscounting scheme over the years has been gradually restricted and at present this facility is operated by the RBI on discretionary basis. During the year 1981-82 (July-June) no fresh bills rediscounting limits were sanctioned to the banks, and as such, there were were no outs outsta tand ndin ing g unde underr the the sche scheme me from from Octo Octobe berr 23, 23, 1981 1981.. Th Thee amou amount nt of bill billss rediscounted each year has shown wide variations, but during each of the four years (1974-75 to 1977-78) (April-March), the volume had been well over Rs 1,000 crore; in subsequent years, a comparative declining trend set in the utilization of the facility due to its being available only on discretionary terms.
Revitalizing Bill Market: In order to revitalize the bill market scheme, several committees made recommendations in the light of the experience of the operation of the scheme. On the basis of these, several measures were initiated by the RBI to promote bill financing. The important ones being: 1) A ceiling ceiling on the proportion proportion of receiva receivables bles (75 per cent) cent) eligible eligible for financing financing under under the cash credit systems. 2) Discretion to banks to sanction additional ad hoc limits for a period not exceeding 3
months, up to an amount equivalent to 10 per cent of the existing bill limit subject to a ceiling of Rs. 1 crore. 3) Stipulat Stipulation ion on ratio ratio of bill acceptanc acceptancee to credit purchase purchasess (25 percent). percent).
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4) Setting Setting up of the Discount Discount and finance finance House House of India (DFHI) (DFHI) tobuy/sel tobuy/sell/dis l/discount count short short term bills. 5) Reductio Reduction n in the the discount discount rate on usance usance bills. bills. 6) Remi Remissi ssion on of stamp stamp duty on bills bills drawn drawn on/made on/made by/ in favour favour ofbank ofbank / corpor corporati ative ve bank. The The procedure requiring requiring the bill bill to the endorsed endorsed and delivered delivered to the re-discounter re-discounter at ever every y time time of redi redisc scou ount ntin ing g has has been been done done away away with with.. A deri deriva vati tive ve usan usance ce promissory note note is issued by the discounter discounter on the strength strength of the underlying underlying bills bills which have tenor corresponding to, or less than, the tenor of the derivatives usance promissory note and in any case not more than 90 days. The derivative promissory promissory note is expected from stamp duty.
Money Market mutual fund (MMMFS): A mutual fund is a professionally managed type of collective investment scheme that pools money from f rom many investors and invests it in stocks, bonds, short- term money market instruments and and other securities. securities. Mutual funds have a fund manager who who invests the money on behalf of the the investors by buying buying / selling stocks, bonds etc. Money market mutual funds (mmmfs) were introduced in April 1991 to provide an additional short-term avenue for investment and bring money market investment within the reac reach h of indi indivi vidu dual als. s. These hese mu mutu tual al fund fundss woul would d inve invest st excl exclus usiv ivel ely y in mo mone ney y mark market et instruments. Money market mutual funds bridge the gap between small investors and the money market. It mobilizes saving from small investors and invests them in short-term debt instruments or money market instruments. There There are various investment investment avenues avenues available available to an investor such as real estate, estate, bank deposits, post office deposits, shares, sh ares, debentures, bonds etc. A mutual fund is one on e more type of Investment avenue available to investors. There are many reasons why investors prefer mutual mutual funds. An investor’s investor’s money money is invested by the mutual mutual fund in a variety variety of shares, bonds and other securities thus diversifying the investors portfolio across different companies and sectors. sectors. This diversifica diversification tion helps helps in reducing the overall overall risk of the portfolio. portfolio. It is also also less expensive to invest in a mutual fund since the minimum investment amount in mutual fund units is fairly low (Rs. 500 or so). With Rs. 500 an investor may be able to buy only a
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few stocks and not get the the desired diversification. These are some of the the reasons why mutual funds have gained in popularity over the years
An Overview - Money Market Mutual Funds: Currently, the worldwide value of all mutual funds totals more than $US 26 trillion. The United States leads with the number of mutual fund schemes. There are more than 8000 mutual mutual fund schemes schemes in in the U.S.A. U.S.A. Comparati Comparatively, vely, India India has around 1000 mutual mutual fund fund schemes, but this number has grown exponentially in the last few years. The Total Assets under Managemen Managementt in India of all Mutual Mutual funds put together together touched a peak of Rs. 5, 44,535 44,535 crs. crs. at the end of August August 2008. . As of today today there there are 41 Mutual Mutual Funds Funds in the country country.. Together they offer over 1000 schemes to the investor. Many more mutual funds are expected to enter India in the next few years. Indians Indians have been traditionally traditionally savers and invested invested money in traditional traditional savings instruments instruments such as bank deposits. Against Against this background, if we look at approximately Rs. 5 lakh lakh crores which Indian Mutual Funds are managing, then it is no mean an achievement. A country traditionally putting money in safe, risk-free investments like Bank FDs, Post Office and Life Insurance, has started to invest in stocks, bonds and shares – thanks to the mutual fund industry.
CHARACTERISTIC OF MUTUAL FUND
The ownership is in the hands of the investors who have pooled in their funds.
It is managed by a team of investment professionals professionals and other service providers.
The pool of funds is invested in a portfolio of marketable investments. investments.
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The investors share is denominated by ‘units’ whose value is called as Net Asset Value (NAV) which changes every day and investors subscription is accounted as unit capital.
The investment portfolio is created according to the stated investment objectives of the fund.
ADVANTAGES OF MUTUAL FUNDS TO INVESTORS:
purcha hasi sing ng unit unitss in a mu mutu tual al fund fund inst instea ead d of buyi buying ng 1. Portfolio Diversification – purc individual stocks or bonds, the investors risk is spread out and minimized up to certain extent. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gain in others.
2. Professional Management Management – The basic advantage of funds is that, they are professional
managed, by well qualified professional. Investors purchase funds because they do not have have the time or the experti expertise se to manag managee their their own own portfo portfolio lio.. A mu mutua tuall fund fund is considered to be relatively less expensive way to make and monitor their investment. investment. 2 2
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3. Economies of scale – Mutual fund buy and sell large amounts of securities at a time,
thus help to reducing transaction costs, and help to bring down the average cost of the unit for their investors.
4. Liquidity – Just like an individual stock, mutual fund also allow investors to liquidate
their holdings as and when they want.
5. Simplicity – Investments in mutual fund is considered to be easy, compare to other
available instruments in the market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs. 50 per month month basis.
Investorss get regular informatio information n on the value of your investme investment nt in 6. Transparency - Investor addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment investment strategy and outlook.
7. Flexibility - Through features such as regular investment plans, regular withdrawal
plans and dividend dividend reinvestment reinvestment plans; you can systematically systematically invest invest or withdraw funds according to your needs and convenience
8. Liquidity – Just like an individual stock, mutual fund also allow investors to liquidate
their holdings as and when they want.
9. Simplicity – Investments in mutual fund is considered to be easy, compare to other
available instruments in the market, and the minimum investment is small. Most AMC
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also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs. 50 per month month basis.
Investorss get regular informatio information n on the value of your investme investment nt in 10. Transparency - Investor addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment investment strategy and outlook.
DISADVANTAGES OF MUTUAL FUNDS TO INVESTORS
1. Professional Management – Some funds doesn’t perform in neither the market, as
their management is not dynamic enough to explore the available opportunity in the market, thus many investors debate over whether or not the so-called professional are any better than mutual fund or investor himself, for picking up stock.
2. Costs – The biggest source of AMC income is generally from the entry and exit load
which they charge from investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon.
3. Dilution – Because funds have small holdings across different companies, high returns
from from a few investm investment entss often often don don’t ’t make make mu much ch differ differenc encee on the overal overalll retur return. n. Dilution is also the result of a successful fund getting to big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.
4. Taxes – When making decision about your money, fund managers don’t consider your
personal tax situation. situation. For example, example, when when a fund manager manager sells a security, a capital capital gain tax is triggered, which affect how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability. 2 2
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5. Professional Management – Some funds doesn’t perform in neither the market, as
their management is not dynamic enough to explore the available opportunity in the market, thus many investors debate over whether or not the so-called professional are any better than mutual fund or investor himself, for picking up stock.
6. Costs – The biggest source of AMC income is generally from the entry and exit load
which they charge from investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon.
7. Taxes – When making decision about your money, fund managers don’t consider your
personal tax situation. situation. For example, example, when when a fund manager manager sells a security, a capital capital gain tax is triggered, which affect how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.
8. Restrictiv Diversif sifica icatio tion n helps, helps, if risk risk minim minimiza izatio tion n is you yourr object objective ive.. Restrictivee gains gains - Diver However, the lack of investment focus also means you gain less than if you had invested directly in a single security. Assume, Reliance appreciated 50 per cent. A direct investment in the stock would appreciate by 50 per cent. But your investment in the mutual fund, which had invested 10 per cent of its corpus in Reliance, will see only a 5 per cent appreciation.
9. Management risk - Assume, Reliance appreciated 50 per cent. A direct investment in the stock would appreciate by 50 per cent. But your investment in the mutual fund, which had invested 10 per cent of its corpus in Reliance, will see only a 5 per cent appreciation.
INVESTORS IN MUTUAL FUNDS:
Mutual funds in India are open to investment by following investors: 2 2
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1. Reside Residents nts includi including: ng: a) Resid Resident ent India Indian n Individ Individual ual b) Indian Companies Companies c) Indian Indian trust/char trust/charitab itable le trusts trusts d) Banks e) Non –Banking –Banking Finance Finance companie companiess f) Insu Insura ranc ncee compa compani nies es g) Prov Provid iden entt funds funds
2. Non Resident Residentss Includ Including: ing: a) Non Non resi residen dents ts Indi Indians ans b) Overseas corporate corporate bodies bodies
3. Fore Foreign ign enti entitie ties: s: a) Foreign Foreign Institutio Institutional nal Investors Investors registere registered d with SEBI. SEBI. Foreign citizens/entities citizens/entities are however h owever now allowed to invest in India.
Government Securities Market (GSM): One of the important sources of borrowing funds is the government securities market (GSM). The government raises short term and long term funds by issuing securities. These 2 2
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securities do not carry risk and are as good as gold as the government guarantees the payment of intere interest st and the repay repayme ment nt of princi principal pal.. Th They ey are, are, there therefor fore, e, refer referred red to as gilt-e gilt-edge dged d securities. The government securities market is the largest market in any economic system and therefore, is the benchmark for other markets. The Government securities securities market consists of securities issued by the State government and the Central government. Government securities include Central Government securities, Treasury bills and State Development Loans. They are issued in order to finance the fiscal deficit and managing the temporary cash mismatches of the Government. Government. All entities registered in India like banks, financial institutions, Primary Dealers, firms, companies, corporate bodies, partnership firms, firms, institutions, institutions, mutual funds, funds, Foreign Foreign Institutional Investors, State State Governments, Governments, Provident Funds, trusts, research organisations, Nepal Rashtra bank and even individuals are eligible to purchase p urchase Government Government Securities. They are generally by banks and institutions with the Reserve Bank of India in Subsidiary General Ledger accounts. They can be held in special accounts known as Constituent Subsidiary General Ledger (CSGL) accounts which can be opened with banks and Primary Dealers or in dematerialized form in demat accounts maintained with the Depository Participants of NSDL.
The securities are issued at par value (Rs 100) and have a coupon rate which is decided at the time of issue by auction technique. These securities securities pay interest at the coupon rate on a half yearly basis and are redeemed at par value on maturity. These These are called dated securities because these these are identified identified by their date of maturity maturity and the coupon, coupon, e.g., e.g., 7.99% GOI GOI 2017 is a Central Government Government security maturing in 2017, which carries a coupon of 7.99% payable half yearly.
Government Government securities are highly h ighly liquid instruments available both in the primary and secondary market. In the primary market Government securities are issued through auctions (yield based or price based auctions) which are conducted by the Reserve Bank of India. There is a scheme of non-competitive bidding in these auctions wherein retail investors can participate for small amounts amounts ranging from Rs 10,000 10,000 to Rs Rs 2 cr face value. value. The tenor tenor of these securities ranges from 1 year to 30 years.
State Development Development Loans are securities issued by the State Governments to finance their expenditures. These securities are generally issued by auction technique which is carried 2 2
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out by the Reserve Bank of India. They also pay half-yearly interest at the coupon rate.
The secondary market consists of both a telephonic market wherein wherein brokers provide quotes to market participants and the electronic trading system operated by the Reserve Bank of India known as Negotiated Dealing System Order Matching (NDS-OM). The instruments traded on the NDS OM include G-secs, T-Bills and SDLs. The membership of this electronic system is open to most institutional players including banks, primary dealers, insurance companies and financial institutions. The settlement of all such trades takes place through the Clearing Corporation of India which guarantees the settlements. The market trades from 9 a.m. to 5.30 p.m. from Monday to Friday
Importance of the Government Securities: GSM GSM consti constitut tutes es the princi principal pal segm segment ent of the debt debt marke market. t. It not only only provid provides es resources to the government for meeting its short term and long term needs but also acts as a benchmark for pricing pricing corporate papers papers of varying maturities. maturities. The government government securities securities issues are helpful in implements the fiscal policy of the government. It is critical in bringing about an effective and reliable transmission channels for the use of indirect instruments of monetary control. The working of the two of the major techniques of monetary control – Open Market Operations (OMOs) and Statutory Liquidity Ratio are closely connected with the dynamics of this market. Government Government securities provide the highest type of collateral for borrowing against their pledge. They have the highest degree of security of capital and the return on each security depends on the coupon rate and period of maturity. They are traded for both long and short term periods depending on the investment and liquidity preference of the investors. Switches between between the short dated and long dated securities take place on the basis of difference in redemption yields.
Issuers, Investors, and Types of Government Securities:
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Government securities are issued by the central government, state governments and semi-governments authorities which also include local government authorities such as city corporations and municipalities. municipalities. The major investors in this market, besides the Reserve bank, are the nationalized banks as they have to subscribe these securities to meet their requirements. The other investors are insurance companies, state government, provident funds, individuals, corporates, non-banking finance companies, primary dealers, financial institutions and to a limited extent, foreign institutional investors and non-resident Indian (NRIs). These investors can be classified into three segments: 1. Wholesale market segment namely institutional players such as banks, financial institutions, insurance companies, primary dealers and mutual funds. 2. Middle segment comprising corporates, provident funds, trusts, non-banking finance companies and small cooperative Banks with an average liquidity ranging from Rs 7 crore to Rs.25 Crore. 3. Retail segment consisting of less active investors such as individuals and non-institutional investors. The government securities securities market is mostly an institutional investors market market as standard lots of trade are around Rs 1 crore and 99 per cent of all trades are done through the Subsidiary General ledger (SGL) (SGL) account, which is a kind of depository account held by the Reserve bank. Individuals cannot open SGL accounts. They have to open SGL-II accounts with a bank or a primary dealer dealer provided they they have a huge balance and agree to trade trade on an ongoing ongoing basis.
Types of Government Securities:
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Government securities are of two types: treasury bills and government dated securities. The latter carry varying coupons rates and are of different maturities. Sometimes, the Reserve Bank converts maturing treasury bills into bonds thereby rolling over the government’s debt. Discount and Finance House of India Ltd. (DFHI), a unique institution of its kind, was set up in April 1988. The share capital of DFHI is Rs 200 crores, which has been subscribed by Reserve Bank of India (10.5%), Public sector banks (62%) and Financial Institutions (26.6%). The discount has been established to deal in money market instruments in order to provide liquidity in the money market. Thus the task assigned to DFHI is to develop a secondary market in the existing money market instruments. instruments. The establishment of a discount House was recommended by a Working Group on Money market. The main objective of DFHI is to facilitate the smoothening of the short term liquid liquidity ity imbal imbalanc ances es by devel developi oping ng an active active mo money ney marke markett and integ integrat rating ing the variou variouss segments of the money market. At preset DFHI’s activities are restricted to: 1. Dealing in 91 days and 364 days Treasury Bills 2. Re-discounting short term commercial bills. 3. Participating in the inert bank call money, notice money and term deposits and 4. Dealing in Commercial Paper and Certificate of deposits. 5. Government dated Securities Treasury bills are issued by Reserve bank of India on behalf of the Government of India. Such bills are sold at fortnightly auctions. The Discount House regularly participates in such auctions. Moreover, it provides a ready market to other institutions/individuals to buy or sell the Treasury Bills. It purchases the same either as outright purchase or on repos basis. Repos mean the right to re-purchase the same bills again. For this purpose the DFHI quotes two way prices with fine spread. Such operations in Treasury Bills impart greater flexibility to banks in their funds management. management. Moreover, Moreover, with the creation of a secondary market for treasury Bills, corporate bodies and other institutions could also invest their short term surplus funds in such bills.
Re-discounting of commercial Bills: 2 2
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Thee Disco Th Discount unt House House aims aims at impar impartin ting g liquid liquidity ity to Comm Commerc ercial ial bills bills whic which h have have already already been discounted discounted by banks banks and financial financial institutions. institutions. It further further re-discou re-discounts nts them and also enables banks and other institutions to re-discount from it such bills. For this purpose DFHI DFHI announces its bid and offers re-discount rates on a fortnightly basis. Call Money Market and Term Deposit: DFHI has been permitted by the Reserve bank of India to operate in the inter-bank call money market, both as lender and borrower of overnight call and notice money up to 14 days. DFHI also renders service to banks in the call money market by arranging or placing funds for banks. The DFHI is authorized to argument its resources with lines of credit from sector and refinance lines from the Reserves bank, The amount and the rate of interest charged by Reserve Bank on refinance would be flexible, so that Reserve Bank can have its impact on the money market by varying the quantum of refinance and the rate of interest thereon.
Small Industries Development Bank of India: In the field of financing of small scale industries in India, a separate apex development bank has started its operations from April 2, 1990. The small industries Development Development Bank of India (SIDBI) (SIDBI) has been set up as an Act of parliament and the principal financial institution for promotion, financing and development development of industry in the tiny and small scale sector. It coordinates the functions of other institutions engaged in similar activities. The SIDBI was established as a wholly-owned subsidiary of the Industrial Development bank of India. It has taken over IDBI’s financing activities relating to the small scale sector.The major activities undertaken by this bank are as follows: 1. Refinanc Refinancing ing of term loans loans granted granted by banks banks and other eligibl eligiblee financial financial institut institutions, ions, namely the state Financial Corporation and State industrial Development Corporations. 2. Direct discounting as well as re-discounting of bills arising out of sale of machinery. 3. Equity type assistance under national Equity Funds and by way of seed capital to
entrepreneurs. 4. Re-disco Re-discounti unting ng of short term term bills arising arising out of sale sale of products products of small scale scale sector. sector.
5. Sources Sources support support to National National Small Small industries industries Corporat Corporation ion and other instituti institutions ons concerned with small industries 2 2
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6. Share Share capital capital and and resource resourcess support support to factorin factoring g organizat organizations. ions.
Inter-Corporate Deposits (ICD): An Inter-Corporate Deposit (ICD) is an unsecured borrowing by corporates and FIs from other corporate entities registered under the Companies Act 1956. The corporate having surplus funds would lend to another corporate in need of funds. This lending would be an uncollateralized uncollateralized basis and hence h ence a higher rate of in interest terest would be demanded by the lender. The short term credit rating of the corporate would determine the rate at which the corporate would be able to borrow funds. Further the credit spreads demanded even for the top rated corporates would be higher than similar rated banks and the rates on ICDs would higher than those in the Certificate of Deposit (CD) market. The tenor of ICD may range from 1 day to 1 year, but the most
common
tenor
of
borrowing
is
for
90
days.
Primary Dealers are only permitted to borrow in the ICD market. The borrowing under ICD is restricted to 50% of the Net Owned Funds and the minimum tenor of borrowing is for 7 days.
Banker's Acceptance: It is a short-term short-term credit investment. investment. It is guaranteed guaranteed by a bank to make payments. payments. The Banker's Banker's Acceptance is traded in the Secondary market. The banker's acceptance is mostly used to finance exports, imports and other transactions in goods. The banker's acceptance need not be held till the maturity date but the holder has the option to sell it off in the secondary market whenever he finds it suitable.
Questionnaire For Indian Money Market Name: Age:
Gender:
Contact No.
Profession:
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1) What is your annual income? i ncome?
□ below 1 lakhs □ between 1 lakhs- 3 lakhs □ between between 3 lakhslakhs- 5 lakhs □ above 5 lakhs
2) How do you invest your savings?
□ Deposits in Banks □ Invest in Real Estate □ Invest in Capital Market □ Invest in Money Money Market Mutual Funds
3) Do you have any kno knowledge wledge about Money Money Market Instruments? Instruments?
□ Yes □ No □ Heard but not know
4) How long would you like to hold your Money Market Instruments? Instruments?
□ Long term period □ Short term period 5) How much risk would you be willing to take?
□ Low □ Average □ Medium □ High 2 2
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6) In your opinion, what is expected rate of return in a year?
□ below 10 % □ between 10 % - 20% □ between 20% - 30% □ above 30%.
7) How would rate your experience with Indian Money Market?
□ Poor □ Average □ Good □ Excellent
8) Is recession had affected your investment decision?
□ Yes □ No
Sampling objective: objective: to find out individual investors investors for the age group of 18 -55 -55 years. Sampling area: Mumbai
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Particulars
No. of investors
Deposits in Banks
13
Investment in
07
Real Estate Investment in
11
Capital Market 2 2
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Investment in
09
Money Market
Investment of Savings
Investment in Money Market 23%
Investment in Capital Market 27%
Deposits in Banks 32% 32%
Investment in Real Estate 18% 18%
Deposits in Banks
Investment in Real Estate
Investment nvestment in Capi Capital tal Mark Market et
Investment nvestment in Mone Money y Mark Market et
The above pie diagram show how the pattern of investment of saving by individual investors in various field of investment
Risk Involvement
No. of Investors
Low
03
Average
05
Medium
15
High
17
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Risk Involveme
High 42%
Low 8%
Averag 13 %
Mediu 37%
Lo ow w
A v e ra ra g ge e Me d diiu m Hig h
Recommendation on Indian Money Market by RBI: Financial sector reforms and monetary policy measures the governor announced certain structural and other policy recommendation recommendation to strengthen and rationalise the functioning functioning of money market.
1) Call/Notice Money Money Market: Market: •
RBI may migrate from OF (Owned Fund) to capital funds (sum of Tier I and Tier II capital) as the benchmark for fixing prudential limits for call/notice money market for scheduled commercial banks. RBI may, however, continue with the present norm 2 2
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associated with co-operative banks (i.e., Aggregate Deposit), PDs (i.e., Net Owned Fund) and non-banks (i.e., 30 per p er cent of their average daily lending during 2000-01). •
Call/notice money market market transactions should be conducted on an electronic negotiated quote driven platform.
•
Banks and PDs with appropriate risk management systems in place and balance sheet structure may be allowed more flexibility to borrow in call/notice money market.
•
Upon accomplishing the call/notice money market into a pure inter-bank one, larger freedom in lending in call/notice market should be afforded to banks and PDs.
2) Repos/CBLO : •
Consequent upon coming into effect of the FRBM Act 2003, there would be a need to broad-base the the pool of securities securities to act as as collateral for repo and CBLO CBLO markets. markets.
•
The possibility of conducting repo transactions on an electronic, anonymous order driven trading system may be explored.
3) Term Money: •
Reporting of term money transactions on NDS platform may be made compulsory to improve transparency.
•
Term money market transactions on an electronic, negotiated quote driven platform should be introduced.
4) CD •
Maturity period of CDs to be reduced to 7 days, in line with that under CP and fixed deposit.
5)Commercial 5)Commercial Paper •
Asset-backed Asset-backed CP should be introduced in the Indian market.
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Development of a transparent benchmark
Presence of a term money market
Development of policies that provide incentives for banks and financial institutions to manage risk and maximise profit
Increasing secondary market activity in commercial paper and certificate of deposit. In case of commercial paper, underwriting should be allowed and revolving underwriting finance facility and Asset backed commercial paper should be introduced. In case of Certificate of deposits the tenure of those of the financial institutions certificate of deposits should be rationalised. Moreover, floating rate certificate of deposits can be introduced.
Rationalisation Rationalisation of the stamp duty structure. Multiple prescription of stamp duty leads to in the administrative costs and administrative administrative hassles.
Change in the regulatory mindset of the Reserve Bank by shifting the focus of control from quantity of liquidity to price which can lead to an orderly development of money market.
Good debt and cash management on the part of the government which will not only be complementary complementary to the monetary policy but give greater freedom to the Reserve Bank in setting its operating procedures.
BIBLIOGRA BIBLIOGRAGHY GHY::
BOOKS BOOKS REFEREN REFERENCE: CE:
•
DYNAMICS DYNAMICS OF OF INDIAN INDIAN FINANCI FINANCIAL AL SYSTEM SYSTEM – BY - PREET PREETY Y SINGH
•
INDIAN INDIAN FINANCIA FINANCIAL L SYSTEM SYSTEM –BY –BY BHARAT BHARATII V. PATHAK PATHAK 2 2
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•
FINANCIAL FINANCIAL SERVIC SERVICE E AND AND MARKET-B MARKET-BY Y DR.S.GUR DR.S.GURUSWA USWAMY MY
•
NSE DEBT DEBT MARKE MARKET T (BASIC (BASIC MODULE MODULE)) WORK WORK BOOK BOOK
WEBSITES: •
www.rbi.org.in/weekly statistical supplement/various issues.co.in
•
www.investopedia.com.
•
www.bseindia.com
•
www.nseindia.com
•
www.economics.indiatimes.com// www.economics.indiatimes.com
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