DISCOUNT AND FINANCE HOUSE OF INDIA (DFHI)

 IT IS A APEX BODY IN INDIAN MONEY MARKET AND ITS ESTABLISHMENT IS MAJOR STEP
TOWARDS DEVELOPING A SECONDARY MARKET FOR MONEY MARKET INSTRUMENT
 THE DFHI WAS SET UP IN APRIL 1988 BY RESERVE BANK OF INDIA. IT COMMENCE ITS
OPERATION FROM JULY 1988
 THE DFHI IS JOINTLY OMNED BY RESERVE BANK OF INDIA (RBI), PUBLIC SECTOR BANK AND ALL
INDIA FINANCIAL INSTITUTION WHO HAVE CONTRIBUTED TO ITS PAID UP CAPITAL OF RS 150 CR
 THE DFHI WAS CATEGORISED AS AN ELIGIBLE INSTITUTION UNDER THE RELEVANT PROVISION
OF RBI ACT
 IT HELP THE CORPORATE ENTITIES , BANK AND FINANCIAL INSTITUTION TO RAISE SHORT
MONEY AND INVEST IN SHORT TERM SURPLUS
 DFHI IS ALSO AN AUTHORISED INSTITUTION TO UNDERTAKE REPO TRANSACTION IN THE
TREASURY BILLS AND ALL DATED GOVERNMENT SECURITIES
 OBJECTIVE

 PROVIDE LIQUIDITY TO MONEY MARKET

 IT PROMOTES SECONDARY MARKET IN SHORT TERM MONEY MARKET INSTRUMENT
 IMPARTING GREATER FLEXIBILITY TO BANK IN THEIR OPERATION
 TO BALANCE THE DEMAND WITH SUPPLY FOR SHORT TERM FINANCE IN THE MONEY
MARKET
 PROVIDE SAFE AND RISK FREE SHORT TERM INVESTMENT

CORPORATE DEBT MARKET

 MEANING : THE DEBT MARKET IS A MARKET WHERE FIXED INCOME SECURITIES OF VARIOUS
TYPES AND FEATURES ARE ISSUED AND TRADED
 THEY ARE ISSUED BY CENTRAL GOVERNMENT , STATE GOVERNMENT , MUNCIPAL
CORPORATION , BANKS , COMMERCIAL ENTITIES ETC
 INDIAN DEBT MARKET STRUCTURE

REGULATOR

SEBI RBI DEPARTMENT OF COMPANY

AFFAIR

ISSUERS INSTRUMENT INVESTOR

(PERSON WHO ISSUE THE (CERTIFICATE) (PERSON WHO MAKES THE
DEBT ) INVESTMENT IN THE DEBT
MARKET )
  ISSUED IN THREE DIFFERENT SECTORS === GOVERNMENT SECURITIES /PUBLIC SECTOR BOND/
PRIVATE SECTOR BOND
 THEY CAN BE SHORT TERM OR LONG TERM

Recent development

INCREASE IN DEFICIET

NO CHANGE IN THE REPO RATE

PURCHASE OF SHORT TERM BOND AND ISSUE OF LONG TERM BOND

YEAR OF VIRUS TO YEAR OF VACCINE

GDP GROWTH ESTIMATED 2021-2022 10.5%

MEANING OF REPO RATE (4%) AND REVERSE REPO RATE (3.35%)

DERIVATIVE MARKET

Derivative Market
DERIVATIVES CAN EITHER BE EXCHANGE-TRADED OR TRADED OVER THE COUNTER (OTC).
EXCHANGE REFERS TO THE FORMALLY ESTABLISHED STOCK EXCHANGE WHEREIN SECURITIES
ARE TRADED AND THEY HAVE A DEFINED SET OF RULES FOR THE PARTICIPANTS.
WHEREAS OTC IS A DEALER ORIENTED MARKET OF SECURITIES, WHICH IS AN UNORGANIZED
MARKET WHERE TRADING HAPPENS BY WAY OF PHONE, EMAILS, ETC.
DERIVATIVE TRADED ON THE EXCHANGE ARE STANDARDIZED AND REGULATED. ON THE OTHER
HAND, OTC DERIVATIVE CONSTITUTES A GREATER PROPORTION OF DERIVATIVES CONTRACTS,
BUT IT CARRIES HIGHER COUNTERPART RISK AND IS UNREGULATED.
THESE FINANCIAL INSTRUMENTS HELP IN MAKING A PROFIT BY SIMPLY BETTING ON THE
FUTURE VALUE OF THE UNDERLYING ASSET.
HENCE THE NAME DERIVATIVE AS THEY DERIVE THE VALUE FROM THE UNDERLYING ASSET.
FOR INSTANCE, DERIVATIVE CONTRACTS ARE USED BY THE WHEAT FARMERS AND BAKER IN
ORDER TO HEDGE THEIR RISK.
THE FARMER FEARS THAT ANY FALL IN PRICE WOULD IMPACT HIS INCOME. HENCE ENTERS THE
CONTRACT TO LOCK IN THE ACCEPTABLE PRICE FOR THE GIVEN COMMODITY.
ON THE OTHER HAND, THE BAKER IN ORDER TO HEDGE HIS RISK ON THE UPSIDE ENTERS THE
CONTRACT SO THAT HE DOES NOT SUFFER LOSSES WITH A RISE IN PRICE.
TYPES OF DERIVATIVE CONTRACTS: THERE ARE FOUR TYPES OF DERIVATIVE CONTRACTS
WHICH INCLUDE FORWARDS, FUTURES, OPTIONS, AND SWAPS.
Forward Contract: A forward contract is a customized contract between two parties to buy or
sell an asset at a Specified price on a future date. A forward contract can be used for hedging
or speculation, although its Non-standardized nature makes it particularly apt for hedging.
They are privately traded over the counter (Example)
Future Contract: A future contract is a legal Agreement to buy or sell a particular commodity
asset or security at a predetermined price at a specified time in the future. Future contracts
are standardized for quality and quantity to facilitate trading on future exchange. They are
publicly traded on a Future exchange (Example)