Professional Documents
Culture Documents
Market
Chapter Objectives
To understand:
1. Characteristics, functions and benefits of money
market.
2. Development of Money market in India
3. Different Money Market Instruments
4. Money Market Intermediaries
5. Link between money market and monetary policy
6. Tools for managing liquidity in the money market
7. Money market derivatives
Benefits of an Efficient
Money Market
Provides a stable source of funds to banks
Commercial Paper
Call/Notice money market
Certificates of Deposit
Commercial Bills
Collateralised Borrowing and
Lending
Obligation
Features of T-bills
- Short term instruments issued by RBI on
behalf of the government
- negotiable and highly liquid securities
- absence of default risk
- assured yield, low transaction cost
- security for SLR purposes
- not issued in scrip form
Types of T- bills
- On tap bills
- Ad hoc bills
- Auctioned T- bills: 91-day;
182-day;
Sale of T - bills
Types of auctions:
2002-03
2010-11
2011-12
2012-13
Commercial Paper
- An unsecured short term promissory note
issued at a discount
- Issuers creditworthy corporates, primary dealers
and all India financial institutions
-Largest issuers of CPs Leasing and Finance
companies
- Usually privately placed with investors.
- Attracts stamp duty.
- Underwriting not mandatory
5749 80,305
91,190
Commercial Bills
- A short term, negotiable and self
liquidating instrument with low risk.
Types: Demand bill
Usance bill
Clean bill
Documentary bill
Inland bill
Foreign bill
Hundi
Derivative Usance Promissory Note
Certificates of Deposit
- A short- term tradeable time deposit issued by
commercial banks and financial institutions.
- Issued at a discount to face value.
- Minimum amount Rs 1 lakh and in multiples there of
- Maturity period : 7 days to one year for banks
: 1 to 3 years for FIs.
- No lock- in period
- Transferable by endorsement
- Banks to maintain appropriate reserve requirement on issue of
CDs.
Issued in demat form
Key investors-Mutual Funds, insurance companies, corporates
Cost attractive vis--vis time deposits
Size of CD market
Amount In Crores
2002-03
2010-11 2011-
122012-13
O/S
3,40,250
908
4,24,740 4,19,530
Collateralised Borrowing
and Lending Obligations
(CBLO)
- Launched by CCIL
-Trading volumes have grown: Dominant segment accounting for 80% of the total
volume
-Average daily turnover during March 2005 was Rs.9625 crore which increased to
Rs.83,270 crore in March 2013
-