45k;Lak;L;lkjAKJLHaUnit-4 Money Market

Introduction – Meaning – Significance – Structure - Features of money market—Importance of

money market – Players in Money market - Money market instruments - Reforms in Indian money
market - Monetary policy - Credit Policy – Role of RBI in money market.

Money Market:

The money market is a market for financial assets that are close substitutes for money. It is a market
for overnight to short-term funds and instruments having a maturity period of one or less than one
year. It is not a physical location (like the stock market), but an activity that is conducted over the
telephone. The money market constitutes a very important segment of the Indian financial system.

The characteristics of the money market are as follows.

• It is not a single market but a collection of markets for several instruments.

• It is a wholesale market of short-term debt instruments.

• Its principal feature is honour where the creditworthiness of the participants is important.

• The main players are: the Reserve Bank of India (RBI), the Discount and Finance House of India
(DFHI), mutual funds, insurance companies banks, corporate investors, non-banking finance
companies (NBFCs), state governments, provident funds, primary dealers, the Securities Trading
Corporation of India (STCI), public sector undertakings (PSUs), and non-resident Indians.

• It is a need-based market wherein the demand and supply of money shape the market.

Functions of the Money Market

A money market is generally expected to perform three broad functions.

• Provide a balancing mechanism to even out the demand for and supply of short-term funds.

• Provide a focal point for central bank intervention for influencing liquidity and general level of
interest rates in the economy.

• Provide reasonable access to suppliers and users of short-term funds to fulfil their borrowings and
investment requirements at an efficient market clearing price.

Besides the above functions, a well-functioning money market facilitates the development of a
market for longer-term securities. The interest rates for extremely short-term use of money serve as
a benchmark for longer-term financial instruments.

Significance or importance/benefits of the money market:

An efficient money market benefits a number of players. It provides a stable source of funds to
banks in addition to deposits, allowing alternative financing structures and competition. It allows
banks to manage risks arising from interest rate fluctuations and to manage the maturity structure
of their assets and liabilities.

A developed inter-bank market provides the basis for growth and liquidity in the money market
including the secondary market for commercial paper and treasury bills. An efficient money market
encourages the development of non-bank intermediaries thus increasing the competition for funds.
Savers get a wide array of savings instruments to choose from and invest their savings.

A liquid money market provides an effective source of long-term finance to borrowers. Large
borrowers can lower the cost of raising funds and manage short-term funding or surplus efficiently.

A liquid and vibrant money market is necessary for the development of a capital market, foreign
exchange market, and market in derivative instruments. The money market supports the long-term
debt market by increasing the liquidity of securities. The existence of an efficient money market is a
precondition for the development of a government securities market and a forward foreign
exchange market.

Trading in forwards, swaps, and futures is also supported by a liquid money market as the certainty
of prompt cash settlement is essential for such transactions. The government can achieve better
pricing on its debt as it provides access to a wide range of buyers. It facilitates the government
market borrowing programme.

Monetary control through indirect methods (repos and open market operations) is more effective if
the money market is liquid. In such a market, the market response to the central bank’s policy
actions are both faster and less subject to distortion.

Main Players/participants in the money market:

Participants in the Money Market:

Theoretically any one can participate in the market. Yet market practices and regulatory
pronouncements have placed certain restrictions on participation for each of the sub-markets in the
money market. For example, call money market is open to only banks. Financial Institutions,
Insurance companies and Mutual funds can only lend in the market. While all resident entities are
participants in these markets, the following are the large and major participants.

The Central Government:

The Central Government is an issuer of Government of India Securities (G-Secs) and Treasury Bills (T-
bills). These instruments are issued to finance the government as well as for managing the
Government’s cash flow. G-Secs are dated (dated securities are those which have specific maturity
and coupon payment dates embedded into the terms of issue) debt obligations of the Central
Government.

These bonds are issued by the RBI, on behalf of the Government, so as to finance the latter’s budget
requirements, deficits and public sector development programmes. These bonds are issued
throughout the financial year. The calendar of issuance of G-Secs is decided at the beginning of every
half of the financial year.

T-bills are short-term debt obligations of the Central Government. These are discounted
instruments. These may form part of the budgetary borrowing or be issued for managing the
Government’s cash flow. T-bills allow the government to manage its cash position since revenue
collections are bunched whereas revenue expenditures are dispersed.

2. State Government:

The State Governments issue securities termed as State Development Loans (SDLs), which are
medium to long-term maturity bonds floated to enable State Governments to fund their budget
deficits.

3. Public Sector Undertakings:

Public Sector Undertakings (PSUs) issue bonds which are medium to long-term coupon bearing debt
securities. PSU Bonds can be of two types: taxable and tax-free bonds. These bonds are issued to
finance the working capital requirements and long-term projects of public sector undertakings. PSUs
can also issue Commercial Paper to finance their working capital requirements.

Like any other business organization, PSUs generate large cash surpluses. Such PSUs are active
investors in instruments like Fixed Deposits, Certificates of Deposits and Treasury Bills. Some of the
PSUs with long-term cash surpluses are also active investors in G-Secs and bonds.

4. Scheduled Commercial Banks (SCBs):

Banks issue Certificate of Deposit (CDs) which are unsecured, negotiable instruments. These are
usually issued at a discount to face value. They are issued in periods when bank deposits volumes
are low and banks perceive that they can get funds at low interest rates. Their period of issue ranges
from 7 days to 1 year.

SCBs also participate in the overnight (call) and term markets. They can participate both as lenders
and borrowers in the call and term markets. These banks use these funds in their day-to-day and
short-term liquidity management. Call money is an important tool to manage CRR commitments.

Banks invest in Government securities to maintain their Statutory Liquidity Ratio (SLR), as well as to
invest their surplus funds. Therefore, banks have both mandated and surplus investments in G-Sec
instruments. Currently banks have been mandated to hold 25% of their Net Demand and Time
Liabilities (NDTL) as SLR. A bulk of the SLR is met by investments in Government and other approved
securities.

Banks participate in PSU bond market as investors of surplus funds. Banks also take a trading
position in the G-Sec and PSU Bond market to take advantage of rate volatility.

Banks also participate in the foreign exchange market and derivative market. These two markets
may be accessed both for covering the merchant transactions or for risk management purposes.
Banks account for the largest share of these markets.

5. Private Sector Companies:

Private Sector Companies issue commercial papers (CPs) and corporate debentures. CPs are short-
term, negotiable, discounted debt instruments. They are issued in the form of unsecured promissory
notes. They are issued when corporations want to raise their short-term capital directly from the
market instead of borrowing from banks.

Corporate debentures are coupon bearing, medium to long term instruments which are issued by
corporations when they want to access loans to finance projects and working capital require ments.
Corporate debentures can be issued as fully or partly convertible into shares of the issuing
corporation.

Bonds which do not have convertibility clause are known as non-convertible bonds. These bonds can
be issued with fixed or floating interest rates. Depending on the stipulated availability of security
these bonds could be classified as secured or unsecured.

Private Sector Companies with cash surpluses are active investors in instruments like Fixed Deposits,
Certificates of Deposit and Treasury Bills. Some of these companies with active treasuries are also
active participants in the G-Sec and other debt markets.

6. Provident Funds:

Provident funds have short term and long-term surplus funds. They invest their funds in debt
instruments according to their internal guidelines as to how much they can invest in each instrument
category.

The instruments that Provident funds can invest in are:

(i) G-Secs,

(ii) State Development Loans,

(iii) Bonds guaranteed by the Central or State Governments.

(iv)Bonds or obligations of PSUs, SCBs and Financial Institutions (FIs), and

(v) Bonds issued by Private Sector Companies carrying an acceptable level of rating by at least two
rating agencies.

7. General Insurance Companies:

General insurance companies (GICs) have to maintain certain funds which have to be invested in
approved investments. They participate in the G-Sec, Bond and short-term money market as lenders.
It is seen that generally they do not access funds from these markets.

8. Life Insurance Companies:

Life Insurance Companies (LICs) invest their funds in G-Sec, Bond or short-term money markets. They
have certain pre-determined thresholds as to how much they can invest in each category of
instruments.
9. Mutual Funds:

Mutual funds invest their funds in money market and debt instruments. The proportion of the funds
which they can invest in any one instrument vary according to the approved investment pattern
declared in each scheme.

10. Non-banking Finance Companies:

Non-banking Finance Companies (NBFCs) invest their funds in debt instruments to fulfill certain
regulatory mandates as well as to park their surplus funds. NBFCs are required to invest 15% of their
net worth in bonds which fulfil the SLR requirement.

11. Primary Dealers (PDs):

The organization of Primary Dealers was conceived and permitted by the Reserve Bank of India (RBI)
in 1995. These are institutional entities registered with the RBI.

The roles of a PD are:

1. To commit participation as Principals in Government of India issues through bidding in auctions.

2. To provide underwriting services and ensure development of underwriting and market- making
capabilities for government securities outside the RBI.

3. To offer firm buy – sell/bid ask quotes for T-Bills & dated securities and to improve secondary
market trading system, which would contribute to price discovery, enhance liquidity and turnover
and encourage voluntary holding of government securities amongst a wider investor base.

4. To strengthen the infrastructure in the government securities market in order to make it vibrant,
liquid and broad based.

Money Market Instruments:

The main money market instrument are as follows:

1. Treasury Bills

2. Call/notice money market

3. Commercial Papers (CPs)

4. Certificates of Deposit

5. Commercial Bills

6. Collateral Borrowing & Lending Obligations

7. Repurchase Agreements (Repos)

TREASURY BILLS

Treasury bills are short-term instruments issued by the Reserve Bank on behalf of the government to
tide over short-term liquidity shortfalls. This instrument is used by the government to raise short-
term funds to bridge seasonal or temporary gaps between its receipts (revenue and capital) and
expenditure. They form the most important segment of the money market not only in India but all
over the world as well. T-bills are repaid at par on maturity.

The difference between the amount paid by the tenderer at the time of purchase (which is less

than the face value) and the amount received on maturity represents the interest amount on Tbills
and is known as the discount. Tax deducted at source (TDS) is not applicable on T-bills.

Features of T-Bills

• They are negotiable securities.

• They are highly liquid as they are of shorter tenure and there is a possibility of inter-bank repos in
them.

• There is an absence of default risk.

• They have an assured yield, low transaction cost, and are eligible for inclusion in the securities for
SLR purposes.

• They are not issued in scrip form. The purchases and sales are affected through the Subsidiary
General Ledger (SGL) account.

• At present, there are 91-day, 182-day, and 364-day T-bills in vogue. The 91-day T-bills are
auctioned by the RBI every Friday and the 364-day T-bills every alternate Wednesday, i.e., the
Wednesday preceding the reporting Friday.

• Treasury bills are available for a minimum amount of Rs. 25,000 and in multiples thereof.

Types of T-Bills

There are three categories of T-bills.

1) On-tap Bills On-tap bills, as the name suggests, could be bought from the Reserve Bank at
any time at an interest yield of 4.66 per cent. They were discontinued from April 1, 1997, as
they had lost much of their relevance.

2) Ad hoc Bills Ad hoc bills were introduced in 1955. It was decided between the Reserve Bank
and the Government of India that the government could maintain with the Reserve Bank a
cash balance of not less than Rs. 50 crore on Fridays and Rs. 4 crore on other days, free of
obligation to pay interest thereon, and whenever the balance fell below the minimum, the
government account would be replenished by the creation of ad hoc bills in favour of the
Reserve Bank.

3) Auctioned T-Bills Auctioned T-bills, the most active money market instrument, were first
introduced in April 1992. The Reserve Bank receives bids in an auction from various
participants and issues the bills subject to some cut-off limits. These bills are neither rated
 nor can they be rediscounted with the Reserve Bank. At present, the Reserve Bank issues T-
bills of three maturities—91-days, 182-days, and 364-days.

4) Commercial Paper:

A commercial paper is an unsecured short term promissory note issued at a discount by

creditworthy corporates, primary dealers and all-India financial institutions. The Reserve Bank
introduced commercial papers in January 1990.It is generally issued at a discount by the leading
creditworthy and highly rated corporates to meet their working capital requirements. Depending
upon the issuing company, a commercial paper is also known as a finance paper, industrial paper, or
corporate paper. Initially only leading highly rated corporates could issue a commercial paper. The
issuer base has now been widened to broad-base the market. Commercial papers can now be issued
by primary dealers and all-India financial institutions, apart from corporates, to access short-term
funds.

A commercial paper can be issued to individuals, banks, companies, and other registered Indian
corporate bodies and unincorporated bodies. Non-resident Indians can be issued a commercial
paper only on a non-transferable and non-repatriable basis. Banks are not allowed to underwrite or
co-accept the issue of a commercial paper.

A commercial paper is usually privately placed with investors, either through merchant bankers or
banks. A specified credit rating of P2 of CRISIL or its equivalent is to be obtained from credit rating
agencies. A commercial paper is issued as an unsecured promissory note or in a dematerialised form
at a discount.

The discount is freely determined by market forces. The paper is usually priced between the lending
rate of scheduled commercial banks and a representative money market rate. Corporates are
allowed to issue CPs up to 100 per cent of their fund-based working capital limits. The paper attracts
stamp duty. No prior approval of the Reserve Bank is needed to issue a CP and underwriting the
issue is not mandatory.

Commercial Bills:

Commercial bills are negotiable instruments drawn by the seller on the buyer which are, in turn,
accepted and discounted by commercial banks. A commercial bill is a short-term, negotiable, and
self-liquidating instrument with low risk. It enhances the liability to make payment on a fixed date
when goods are bought on credit. According to the Indian Negotiable

Instruments Act, 1881, a bill of exchange is a written instrument containing an unconditional order,
signed by the maker, directing to pay a certain amount of money only to a particular person, or to
the bearer of the instrument. Bills of exchange are negotiable instruments drawn by the seller
(drawer) on the buyer (drawee) for the value of the goods delivered to him. Such bills are called
trade bills. When trade bills are accepted by commercial banks, they are called commercial bills.

Types of Commercial Bills:

• Demand Bill: A demand bill is payable on demand, i.e., immediately at sight or on presentation to
the drawee.

• Usance Bill: A usance bill is payable after a specified time. If the seller wishes to give some time for
payment, the bill would be payable at a future date.
• Clean Bill: In a clean bill, documents are enclosed and delivered against acceptance by the drawee,
after which it becomes clear.

• Documentary Bill: In the case of a documentary bill, documents are delivered against payment
accepted by the drawee and documents of the field are held by bankers till the bill is paid.

• Inland Bill: Inland bills must (a) be drawn or made in India and must be payable in India; or (b)
drawn upon any person resident in India.

• Foreign Bill: Foreign bills, on the other hand, are (a) drawn outside India and may be payable

in and by a party outside India, or may be payable in India or drawn on a party in India; or (b) it may
be drawn in India and made payable outside India.

• Hundi: The indigenous variety of bill of exchange for financing the movement of agricultural
produce, called a ‘hundi,’ has a long tradition of use in India. It is in vogue among indigenous bankers
for raising money or remitting funds or to finance inland trade.

• Derivative Usance Promissory Note: With a view to eliminating movement of papers and
facilitating multiple rediscounting, the RBI introduced an innovative instrument known as ‘Derivative
Usance Promissory Notes,’ backed by such eligible commercial bills for required amounts and usance
period (up to 90 days).

Certificates of Deposits:

Certificates of deposit (CDs) are unsecured, negotiable, short-term instruments in bearer form,
issued by commercial banks and development financial institutions. Certificates of deposit were
introduced in June 1989. Only scheduled commercial banks excluding Regional Rural Banks and Local
Area Banks were allowed to issue them initially.

Financial institutions were permitted to issue certificates of deposit within the umbrella limit fixed by
the Reserve Bank in 1992.Certificates of deposit are time deposits of specific maturity similar to fixed
deposits (FDs). The biggest difference between the two is that CDs, being in bearer form, are
transferable and tradable while FDs are not. Like other time deposits, CDs are subject to SLR and CRR
requirements. There is no ceiling on the amount to be raised by banks. The deposits attract stamp
duty as applicable to negotiable instruments. They can be issued to individuals, corporations,
companies, trusts, funds, associates, and others.

Call Money Market:

Under call money market, funds are transacted on overnight basis and under notice money market,
funds are borrowed/lent for a period between 2–14 days. The call money market is a market for very
short-term funds repayable on demand and with a maturity period varying between one day to a
fortnight. When money is borrowed or lent for a day, it is known as call (overnight) money.
Intervening holidays and/or Sundays are excluded for this purpose. When money is borrowed or lent
for more than a day and up to 14 days, it is known as notice money. No collateral security is required
to cover these transactions. The call money market is a highly liquid market, with the liquidity being
exceeded only by cash. It is highly risky as well as extremely volatile.
Repurchase Agreements (Repo)

Repo is a money market instrument, which enables collateralised short-term borrowing and lending
through sale/purchase operations in debt instruments. Under a repo transaction, a holder of
securities sells them to an investor with an agreement to repurchase at a predetermined date and
rate.

The reverse repo is exactly opposite to repo transaction. In this type of transaction, an investor with
temporary surplus cash buys the security and agree to sell it back at a future date at a
predetermined price. Repo rate is annualized interest rate for the funds transferred by the lender to
the borrower.

A reverse repo is the mirror image of a repo. The securities eligible for repo/reverse repo transaction
are specified as the Central and State Government securities including treasury bills.

Collateralised Borrowing and Lending Obligation (CBLO)

The Clearing Corporation of India Limited (CCIL) launched a new product–Collateralised Borrowing
and Lending Obligation (CBLO)—on January 20, 2003 to provide liquidity to nonbank entities hit by
restrictions on access to the call money market. CBLO is a discounted instrument available in
electronic book entry form for the maturity period ranging from 1 day to 19 days. The maturity
period can range up to one year as per the RBI guidelines. The CBLO

is an obligation by the borrower to return the borrowed money, at a specified future date, and an
authority to the lender to receive money lent, at a specified future date with an option/privilege to
transfer the authority to another person for value received. The eligible securities are central
government securities including treasury bills with a residual maturity period of more than six
months. There are no restrictions on the minimum denomination as well as lock-in period for its
secondary market transactions.

Role of RBI in Money Market:

The Reserve Bank of India is the most important constituent of the money market. The
market comes within the direct purview of the Reserve Bank regulations.

The aims of the Reserve Bank’s operations in the money market are :

• to ensure that liquidity and short-term interest rates are maintained at levels consistent with
the monetary policy objectives of maintaining price stability;
• to ensure an adequate flow of credit to the productive sectors of the economy; and
• to bring about order in the foreign exchange market.
Detailed explanation of the Above:

RBI as Controller of Credit: Regulator of Money supply

RBI formulates and implements the Monetary Policy of India to keep the economy on growth
path. Monetary Policy refers to the process employed by RBI to control availability & cost of
currency and thus keeping Inflationary & deflationary trends low and stable. RBI adopts
various measures to regulate the flow of credit in the country. The measures adopted by RBI
can broadly be categorized as Quantitative & Qualitative tools.

Quantitative Tools
Quantitative measures of credit control are applicable to entire money and banking system
without discrimination. They broadly refer to reserve ratios, bank rate policy etc. Reserve
ratios are the share of net demand & time liabilities (NDTL) which banks have to keep aside
to ensure that they have sufficient cash to cover customer withdrawals.

A. Cash Reserve Ratio (CRR): 

CRR is one of the most commonly used by RBI as quantitative tool of credit control. The
ratio specifies minimum fraction of the total deposits of customers, which commercial banks
have to hold as reserves either in cash or as deposits with the central bank. CRR is set
according to the guidelines of the central bank of a country. RBI is empowered to
vary CRR between 3 percent and 15 percent.

Present situation
Current CRR is 4% in India.  Cash Reserve Ratio was quoted at 4 percent in its recently
announced Sixth bi-monthly Monetary Policy Statement 2019-20. Earlier, the Cash Reserve
Ratio in India averaged 5.67 percent from 1999 until 2016, reaching an all time high of 10.50
percent in March of 1999 and a record low of 4 percent in February of 2013.

CRR: Impact of Increase & decrease 

CRR is the share of Net Demand and Time Liabilities (NDTL) that banks must maintain as
cash with RBI. The RBI has set CRR at 4%. So if a bank has 200 Crore of NDTL then it has
to keep Rs. 8 Crore in cash with RBI. RBI pays no interest on CRR.

For example – if we assume that economy is showing inflationary trends & RBI wants to
control this situation by adjusting SLR & CRR. If RBI increases SLR to 50% and CRR to
20% then bank will be left only with Rs. 60 crore for operations. Now it will be very difficult
for bank to maintain profitability with such small capital. Bank will be left with no choice but
to raise interest rate which will make borrowing costly. This will in turn reduce the overall
demand & hence price will come down eventually.

B. Statutory Liquidity Ratio (SLR)

The current SLR announced by RBI is 19% of NDTL as announced by RBI in May 2019.
The share of net demand and time liabilities that banks must maintain in safe and liquid
assets, such as government securities, cash and gold is SLR.

C. Bank Rate
Current Bank rate is 6.25% . When banks want to borrow long term funds from RBI, it is the
interest rate which RBI charges from them. The bank rate is not used to control money supply
these days although it provides the basis of arriving at lending and deposit rates. However, if
a bank fails to keep SLR or CRR, RBI will then impose penalty & it will be 300 basis points
above bank rate.

D. Repo Rate
Present Repo rate is 5.75% with effect from June 6, 2019. If banks want to borrow money
(for short term, usually overnight) from RBI, the banks have to pay this interest rate. Banks
have to pledge government securities as collateral. This kind of deal happens through a
repurchase agreement. If a bank wants to borrow Rs. 100 crores, it has to provide government
securities at least worth Rs. 100 crore (could be more because of margin requirement which is
5%-10% of loan amount) and agree to repurchase them at Rs. 106.50 crore at the end of
borrowing period. So the bank has paid Rs. 6.50 crore as interest. This is the reason it is
called repo rate. The government securities which are provided by banks as collateral cannot
come from SLR quota (otherwise the SLR will go below 21.5% of NDTL and attract
penalty). Banks have to provide these securities additionally.

To curb inflation, RBI increases Repo rate which will make borrowing costly for banks.
Banks will pass this increased cost to their customers which make borrowing costly in whole
economy. Fewer people will apply for loan and aggregate demand will get reduced. This will
result in inflation coming down. RBI does the opposite to fight deflation. Although when RBI
reduces Repo rate, banks are not legally required to reduce their base rate.

Current situation
The Reserve Bank of India on Thursday June 6, 2019, cut its benchmark repo rate by 25 basis
points to 5.75%. This is the third rate cut in 2019. The change in repo rate is likely to lower
interest rates on new bank loans.

E. Reverse Repo Rate

At present,reverse repo rate is 5.75% with effect from May 2019. Reverse repo rate is just the
opposite of repo rate. If a bank has surplus money, they can park this excess liquidity with
RBI and central bank will pay interest on this. This interest rate is called reverse repo rate.

F. Open Market Operation (OMO)

Open market operation is the activity of buying and selling of government securities in open
market to control the supply of money in banking system. When there is excess supply of
money, RBI sells government securities thereby taking away excess liquidity. Similarly,
when economy needs more liquidity, RBI buys government securities and infuses more
money supply into the economy.

G. Marginal Standing Facility (MSF)

This scheme was introduced in May, 2011 and all the scheduled commercial banks can
participate in this scheme. Banks can borrow up to 2.5% of their respective Net Demand and
Time Liabilities. RBI receives application under this facility for a minimum amount of Rs. 1
crore and in multiples of Rs. 1 crore thereafter. The important difference with repo rate is that
bank can pledge government securities from SLR quota (up to 1%). Current MSF rate is
6.25%.

Qualitative Tools of Money Control

Qualitative measures of credit control are discriminatory in nature and are applied for specific
purpose or to specific financial organization, bank or others which RBI thinks are violating
the monetary policy norms.
A. Loan to Value LTV or Margin Requirements
Loan to Value is the ratio of loan amount to the actual value of asset purchased. RBI
regulates this ratio so as to control the amount bank can lend to its customers. For example, if
an individual wants to buy a car from borrowed money and the car value is Rs. 10 Lac, he
can only avail a loan amount of Rs. 7 Lac if the LTV is set to 70%. RBI can decrease or
increase to curb inflation or deflation respectively.

B. Selective credit control

RBI can specifically instruct banks not to give loans to traders of certain commodities. This
prevents speculations/ hoarding of commodities using money borrowed from banks.

C. Moral Suasion
RBI persuades bank through meetings, conferences, media statements to do specific things
under certain economic trends. An example of this measure is to ask banks to reduce their
Non-performing assets (NPAs).

Regulates and Supervises the Payment and Settlement Systems

The Payment and Settlement Systems Act of 2007 (PSS Act) gives the Reserve Bank
oversight authority, including regulation and supervision, for the payment and settlement
systems in the country. In this role, the RBI focuses on the development and functioning of
safe, secure and efficient payment and settlement mechanisms. Two payment systems
National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement (RTGS) allow
individuals, companies and firms to transfer funds from one bank to another. These facilities
can only be used for transferring money within the country.
14. Treasury bills are short term liability of the central government they are issued for meeting

the temporary deficit which government face due to access of expenditure over revenue at
some point of time