PRESENTED BY: AKHIL A P IVth Sem. M.

Com DCMS

As per RBI definitions A market for short terms financial assets that are close substitute for money, facilitates the exchange of money in primary and secondary market The money market is a mechanism that deals with the lending and borrowing of short term funds (less than one year) A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded

Some important money market instruments are:

Commercial Treasury

Bill Certificate of Deposit Repurchase Agreement Bankers Acceptance Commercial Bill Call and Short Notice Money

Paper

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

It 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

(T-bills) are the most marketable money market security

They are issued with three-month, six-month and oneyear maturities

T-bills are purchased for a price that is less than their par(face) value; when they mature, the government pays the holder the full par value

T-Bills are so popular among money market instruments because of affordability to the individual investors

CD is a time deposit with a bank

Like

most time deposit, funds can not withdrawn before maturity without paying a penalty
CDs

have specific maturity date, interest rate and it can be issued in any denomination
The

main advantage of CD is their safety can earn more than a saving account

Anyone

interest

Repo

is a form of overnight borrowing and is used by those who deal in government securities
They

are usually very short term repurchases agreement, from overnight to 30 days of more
Which

enables collateralized short term borrowings and lending through sale/purchase operation in debt instrument.
Under

REPO a holder of securities sell them to and investor with an agreement to repurchase at a predetermined date and rate

A draft drawn by an individual or firm upon a bank and accepted by the bank whereby it is ordered to pay to the order of a designated party or to bearer a certain sum of money at a specified time in future.

It is a written instrument containing an unconditional order the bill is signed by the drawer directing a certain person to pay a certain sum of money only to or order of a certain person or to the bearer of the instrument at a fixed time in future on demand.

It is refers to a money given for a very short period. It may be taken for a day or overnight but not exceeding 7 days in any circumstances. Surplus fund of the commercial banks and other institutions are usually given as call money banks are the borrowers as well as lenders for the call fund.

Financial market and services, E. Gordon, K. Natarajan, Himalaya Publishing House, New Delhi Indian financial system(7th ed.), M. Y. Khan, Tata McGraw-Hill, New Delhi Indian financial system, Sasi. K. Gupta, Nisha Aggrawal, Neeti Gupta, Kalyani Publishers, New Delhi