MONEY MARKET By Ankit chauhan

(MBA student)

MONEY MARKET

The Money Market is a short term market that deals with different money market Instruments.

Money market Instruments: Treasury Bills Commercial Papers Certificate of Deposit Call Money Commercial bills

Treasury Bills

One type of safest money market Instruments, are short term borrowing Instruments of the central government of India.

T-bills are short term instruments issued by RBI on behalf of the Government of India.

TYPES:-

At present, the Government of India issues three types of treasury bills through auctions, namely, 91-day, 182-day and 364-day. There are no treasury bills issued by State Governments

Auctioned T-bills( April, 1992):-

91-day T-bills are auctioned every week on Wednesdays, 182-day and 364-day T-bills are auctioned every alternate week on Wednesdays.

AMOUNT : Treasury bills are available for a minimum amount of Rs.25,000 and

in multiples of Rs. 25,000.

Commercial Papers

Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. It was introduced in India 1990 it has become the popular debt instrument of the corporate word. Issued at a discounted to face value basis. Corporate, primary dealers (PDs) and the All-India Financial Institutions (FIs) are eligible to issue CP.CPs are issued in the denomination of Rs 5 lakhs And the multiples of Rs 5 lakhs. Advantage: simplicity – less doc. Between issuer and investor. CP provides investors with returns then they could get from the banking system. Disadvantage: Its usage is limited to only blue-chip companies.

Certificate of Deposit Introduced by the RBI. Issued by the commercial bank and co-operative bank.

( 3 month – 1 year) subscribed by an individual as well as by an

institution. No advance can be taken against the security of the

CDs. No limit for investment in CDS by the banks.

Commercial bills

Commercial bills arise in trade transaction . When goods are sold credit, the seller of goods writes a bill of exchange and the buyer of goods accepts the same.

When the trade bills are accepted by the banks, they are called as commercial bills.

The maturity of 60-90 days depending on the credit period prevailing in an industry.