Professional Documents
Culture Documents
Money Market in India
Money Market in India
ON
MONEY MARKET IN INDIA
Primary Market
Secondary Market
Treasury Bills
Certificate of deposit
Commercial paper
Call/notice Money
Term money
Repo
CBLO
Treasury bills
T-bills are short-term instrument issued by RBI on behalf of the govt. to tide
over short-term liquidity shortfalls. This instrument is issued by the govt. to
raise short –term funds to bridge seasonal or temporary gap between its
receipt(revenue & capital) and expenditure. T-bills are repaid at par on
maturity. The difference between the amount paid by the tenderer at the time
of purchases (which is less than the face value) and the amount received on
maturity represent the interest amount on T-bills and is known as the discount.
Feature of T-bills.
They negotiable securities.
They are highly liquid as they are of shorter tenure and there is a possibilities
of inter-bank repos in them.
There is an absence of default risk.
Continued…
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
effected 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 RBI every Friday
and 363- day T-bill every alternate Wednesday i.e. the
Wednesday preceding the reporting Friday
T-bills are available for a minimum amount of Rs 25000 and in
multiples theirof.
Sale of T-bills
Type of auction
Multiple –price auction
Uniform price auction
Bidding process:
Competitive bid
Participants: primary dealers, banks, corporate, mutual fund etc.
Non-competitive bid
Participants: state government provident fund, government provident fund,
pension fund
Call/notice money market
There is inverse relation between call rates and short-term money market
instrument such as certificate of deposit and commercial paper.
When call rates peak to high level ,bank raise more funds through CD.
When call rates are lower ,many bank fund CP by borrowing from call money
and earn profits through arbitrage between money market segment.
A large issue of Govt.securities also affect call money rates. when banks
subscribe to large issue of G-sec, liquidity is sucked out from banking system.
This increases the demand for fund in call money market which pushes up
call money rates.
Increase in CRR also increases call money rates.
Call money market and foreign exchange market are related. When call rates
rise , bank borrow dollars from their overseas branches, swap them for
rupees and lend them in the call money market.
Continued..
A) No- 67%
B) Yes- 18%
A) Yes- 25%
B) No- 75%
Does RBI Plays a Vital Role?
A) Yes- 80%
B) No- 20%
Which is More Important Short Term or Long Term Fund?
C) Both- 50%
Is Developed MM Sign of Developed Economy?
A) Yes- 65%
B) No- 10%
A) Yes- 85%
B) No- 15%
Is Unorganized Part Really Uncontrollable?
A) Yes- 55%
B) No- 45%
Is Technology a Big Factor to Develop a MM?
A) Yes- 70%
B) No- 30%
Conclusion