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Call Money market Government securities market T-bills market Commercial paper Certificate of deposits Repo Rev Repo

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that brings together buyers and sellers with a view to agreeing a price The basis of how an economy operates through production and subsequent exchange

Market any place or process

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Call/Notice money is the money borrowed or lent on demand for a very short period. When money is borrowed or lent for a day, it is known as Call (Overnight) Money. Intervening holidays and/or Sunday are excluded for this purpose. Thus money, borrowed on a day and repaid on the next working day, (irrespective of the number of intervening holidays) is "Call Money". When money is borrowed or lent for more than a day and up to 14 days, it is "Notice Money". No collateral security is required to cover these transactions.

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Call loans are generally made on a clean basis- i.e. no collateral is required The main function of the call money market is to redistribute the pool of dayto-day surplus funds of banks among other banks in temporary deficit of funds The call market helps banks economize their cash and yet improve their liquidity It is a highly competitive and sensitive market It acts as a good indicator of the liquidity position
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Those who can both borrow and lend in the market RBI (through LAF), banks and primary dealers Once upon a time, selected financial institutions viz., IDBI, UTI, Mutual funds were allowed in the call money market only on the lenders side These were phased out and call money market is now a pure inter-bank market (since August 2005)

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Government Securities are securities issued by the Government for raising a public loan or as notified in the official Gazette. They consist of Government Promissory Notes, Bearer Bonds, Stocks or Bonds held in Bond Ledger Account. They may be in the form of Treasury Bills or Dated Government Securities

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Issued at face value No default risk as the securities carry sovereign guarantee. Ample liquidity as the investor can sell the security in the secondary market Interest payment on a half yearly basis on face value No tax deducted at source Can be held in D-mat form. Rate of interest and tenor of the security is fixed at the time of issuance and is not subject to change Redeemed at face value on maturity Maturity ranges from of 2-30 years. Securities qualify as SLR investments (unless otherwise stated).

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Treasury Bill market- Also called the T-Bill market

These bills are short-term liabilities (CMB,14day, 91-day, 182-day, 364-day) of the Government of India It is an IOU(I owe You)of the government, a promise to pay the stated amount after expiry of the stated period from the date of issue They are issued at discount to the face value and at the end of maturity the face value is paid The rate of discount and the corresponding issue price are determined at each auction RBI auctions 91-day T-Bills on a weekly basis, 182-day T-Bills and 364-day T-Bills on a fortnightly basis on behalf of the central government
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CDs are short-term borrowings in the form of UPN(Usance Promissory Notes) issued by all scheduled banks and are freely transferable by endorsement and delivery. Introduced in 1989 Maturity of not less than 7 days and maximum up to a year. FIs are allowed to issue CDs for a period between 1 year and up to 3 years Subject to payment of stamp duty under the Indian Stamp Act, 1899 Issued to individuals, corporations, trusts, funds and associations They are issued at a discount rate freely determined by the market/investors

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Short-term borrowings by corporates, financial institutions, primary dealers from the money market Can be issued in the physical form (Usance Promissory Note) or demat form Introduced in 1990 When issued in physical form are negotiable by endorsement and delivery and hence, highly flexible Issued subject to minimum of Rs. 5 lacs and in the multiple of Rs. 5 lacs after that Maturity is 7 days to 1 year Unsecured and backed by credit rating of the issuing company Issued at discount to the face value

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OMO or Open Market Operations is a market regulating mechanism often resorted to by Reserve Bank of India. Under OMO Operations Reserve Bank of India as a market regulator keeps buying or/and selling securities through it's open market window. It's decision to sell or/and buy securities is influenced by factors such as overall liquidity in the system,

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The minimum and maximum levels of CRR are prescribed at 3% and 20% of demand and term liabilities (DTL) of the bank, respectively, under Reserve Bank of India Act of 1934. The minimum and maximum SLR are prescribed at 25% and 40% of DTL respectively, under Banking Regulation Act of 1949. The CRR and SLR are to be maintained on fortnightly basis. The RBI is authorized to increase or decrease the CRR and SLR at its discretion.

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SLR is to be maintained in the form of the following assets: Cash balances (excluding balances maintained for CRR) Gold (valued at price not exceeding current market price) Approved securities valued as per norms prescribed by RBI.

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In

repo

transaction

two

parties

exchange

securities and cash with a simultaneous agreement

to reverse the transaction after a given period. Thus a repo represents a collateralised short-term

lending transaction. The party which lends securities

(or borrows cash) is said to be doing the repo and the party which lends cash (or borrows securities) is said to be doing a reverse repo

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Discuss the latest trends on the below mentioned Financial instruments. Call Money market Government securities market T-bills market Commercial paper Certificate of deposits Repo Reverse Repo
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