Fundamentals of Money Market

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Short Term Finance Current Operations ,working capital Major Institutions are commercial banks and the central bank, discount and finance house Transaction takes place over phones Large Amount Transactions No secondary market or brokers exists Assets can be converted into cash easily

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Call Money Market Commercial Bill Market Treasury Bill Market Commercial Paper Certificate Of Deposit

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Issued for short period of 1-14 days Participants are 1. both lenders and borrowers borrowers i.e. banks, DFHI, co-operative banks 2. only lenders i.e. LIC, UTI, IDBI, It provides liquidity Helps banks to maintain SLR

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An instrument in writing containing an unconditional order to pay a certain sum of  money Types of bills like:-Demand, clean, foreign documentary, Inland, Accommodation, supply It is self liquidating as they are drawn for 3-6 months

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They are issued by RBI on behalf of govt. to meet deficits Treasury bills are of 2 types :1. Issued to public and financial institutions They are freely marketable 2 Issued only in favour of RBI They are purchased by RBI and issue currency notes They are not marketable On the basis of periodicity, treasury bills are of :91, 182, 364 days RBI can rediscount them after 14 days

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It is a short term deposit instrument issued by banks and financial institutions ISSUERS;Commercial banks, Financial Institutions SUBSCRIBERS;Individuals, corporations, trusts and NRIs FEATURES:Document of title for a time period is given Unsecured Freely transferable Repayable on fixed date and no grace days are given Subject to stamp duty

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1.Stamp duty i.e. Cost involved is between 0.5-1/.P.a 2.Need to develop secondary market 3. Lock in period of 45 days is another problem 4. Banks are required to maintain CRR and SLR requirements for issuing them 5. Banks can not buy them t hem back

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They are unsecured promissory notes issued with a fixed maturity approved by RBI Issuers;All private and public sector units, non- banking companies Investor:Individuals, banks and corporate

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1. co. should have net worth of 10 crores 2. they are issued in multiples of 25 lakhs 3.issued for minimum 7 days and maximum 6 months