MONEY MARKET INSTRUMENTS

Group members in this project

Sanjana Baliga Divya Sancheti Tejal Thakkar

Vinay Pisupati Killol Koradia Swaminath Jayaraman

Srila Doshi

Money Market Instruments

Call Money Market Repurchase Agreements Repo Reverse Repo Commercial Papers Certificate of Deposits Treasury Bills Inter corporate deposits Bankers Acceptance Money Market Mutual Funds

CALL /NOTICE /TERM MONEY DEPOSIT

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 MONEY. When money is borrowed or lent for more than a day and up to 14 days, it is known as NOTICE MONEY. Inter-bank market for deposits of maturity beyond 14 days is referred to as the TERM MONEY MARKET.

REPO AND REVERSE REPO RATE

Repurchase transaction or short terms loans Approved by RBI. Security with an agreement. Perspectives of seller and buyer Compensation for use of funds and repo period. Rate of Interest agreed upon.

Commercial Paper

Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.

CP is a short term unsecured loan issued by a corporation typically financing day to day operation.

CP is very safe investment because the financial situation of

a company can easily be predicted over a few months.

Only company with high credit rating issues CPs.

Certificate of Deposit (CD)

It is a time deposit with a bank.

Funds can not withdrawn before maturity without paying a penalty. CDs bears the maturity date, the fixed rate of interest and it can be issued in any denomination.
They are stamped & transferred by endorsement. Term ranges from three months to five years.

Main features are:

All scheduled banks are eligible to issue CDs. They can be issued to Individuals, corporations, trusts, funds & associations

NRIs can also subscribe to CDs They are issued in physical form No lock-in period

Banks can not buy back their own CDs before maturity.

Treasury Bills (T-Bills)

Treasury bills were first issued by the indian government in 1917.

Short term financial instruments issued by the central bank of

the country.

Maturity periods are 91 days, 182 days and 364 days.

Treasury Bills (T-Bills)

The price with which t-bills are issued comes separate from that of the face value.

The main advantages of investing in t-bills are no tax

deducted at source, no default risk.

Money Market Mutual Funds