7/28/2019 Money Market Instrum
1/2
The Following are the Instruments are traded in Indian
Money Market:
1.Call Money:The money market is a market for short-term
financial assets that are close
substitutesof money. The most important feature of a money
market instrument is that it is liquid
and can be turned over quickly at low cost and provides an
avenue for equilibrating the short-
term surplus funds of lenders and the requirements of borrowers.
The call/notice money market
forms an important segment of the Indian money market.
2. Commercial Papers:Commercial Paper is short-term loan that is
issued by a corporation
use for financing accounts receivable and inventories.
Commercial Papers have higher
denominations as compared to the Treasury Bills and the
Certificate of Deposit. The maturity
period of Commercial Papers are a maximum of 9 months.
3. Treasury Bills: The Treasury bills are short-term money
market instrument that mature in
a year or less than that. The purchase price is less than the
face value. They have 3-month, 6-
month and 1-year maturity periods.The security attached to the
treasury bills comes at the cost
of very low returns. Treasury bills began being issued by the
Indian government in 1917.
4. Commercial Bills: It enhances the liability to make payment
in a fixed date when goods are
bought on credit through a short term, negotiable, and
self-liquidating instrument with low risk.
It may be a demand bill or a usance bill. A demand bill is
payable on demand, that is
immediately at sight or on presentation by the drawee. A usance
bill is payable after a specified
time.
5. Certificate Of Deposit: The certificates of deposit are
basically time deposits that are
issued by the commercial banks with maturity periods ranging
from 3 months to five years.The
bearer of a certificate of deposit receives interest. The
maturity date, fixed rate of interest and a
fixed value - are the three components of a certificate of
deposit. It was in 1989 that the
certificate of deposit was first brought into the Indian money
market.
6. Repo Instrument: The Repo or the repurchase agreement is used
by the government
security holder when he sells the security to a lender and
promises to repurchase from him
overnight. Repo transactions are allowed only among RBI-approved
securities like state and
central government securities, T-bills, PSU bonds, FI bonds and
corporate bonds.
7. Banker Acceptance: It is a short-term credit investment. It
is guaranteed by a bank to
make payments. The Banker's Acceptance is traded in the
Secondary market. 90 days is the
usual term for these instruments. The term for these instruments
can also vary between 30 and
180 days.
