INSTRUMENTS OF MONEY MARKET
CALL MONEY - Call or notice money is an amount borrowed or lent on demand for a very short period. If
the period is greater than one day and up to 14 days it is called Notice money; otherwise the amount is
known as Call money.
This is a completely inter-bank market. Interest rates are market determined. In view of the short tenure of these
transactions, both borrowers and lenders are required to have current accounts with Reserve Bank of India.
TREASURY BILLS - These are the lowest risk category instruments for the short term. RBI issues treasury
bills [T-bills] at a prefixed day and for a fixed amount. There are 3 types of treasury bills. -91-day T-bill:
maturity is in 91 days, it is auctioned on every Friday of every week and the notified amount for auction is Rs.
100 crores. -182-day T-bill: maturity is in 182 days, it is auctioned on every alternate Wednesday, which is not
a reporting week and the notified amount for auction is Rs. 100 crores.
-364-day T-bill: maturity is 64 days, it is auctioned on every alternate Wednesday which is a reporting week
and the notified amount for the auction is Rs. 500 crores.
CERTIFICATES OF DEPOSITS - After treasury bills, the next lowest risk category investment option is
Cer-tificate of Deposit (CD) issued by banks and Financial Institutions (FI). Allowed in 1989,
CDs were one of RBI‟s measures to deregulate the cost of funds for banks and FIs. A CD is a negotiable
promissory note, secure and short term, of up to a year, in nature.
Although RBI allows CDs up to one-year maturity, the maturity most quoted in the market is for 90 days.
COMMERCIAL PAPERS - Commercial papers [CPs] are negotiable short-term unsecured promissory notes
with fixed maturities, issued by well-rated organizations. These are generally sold on discount basis.
Organiza-tions can issue CPs either directly or through banks or merchant banks
[called as dealers]. These instruments are normally issued in the multiples of five crores for
30/45/60/90/120/180/270/364 days
CALL MONEY - Call or notice money is an amount borrowed or lent on demand for a very short period. If
the period is greater than one day and up to 14 days it is called Notice money; otherwise the amount is
known as Call money.
This is a completely inter-bank market. Interest rates are market determined. In view of the short tenure of these
transactions, both borrowers and lenders are required to have current accounts with Reserve Bank of India.
TREASURY BILLS - These are the lowest risk category instruments for the short term. RBI issues treasury
bills [T-bills] at a prefixed day and for a fixed amount. There are 3 types of treasury bills. -91-day T-bill:
maturity is in 91 days, it is auctioned on every Friday of every week and the notified amount for auction is Rs.
100 crores. -182-day T-bill: maturity is in 182 days, it is auctioned on every alternate Wednesday, which is not
a reporting week and the notified amount for auction is Rs. 100 crores.
-364-day T-bill: maturity is 64 days, it is auctioned on every alternate Wednesday which is a reporting week
and the notified amount for the auction is Rs. 500 crores.
CERTIFICATES OF DEPOSITS - After treasury bills, the next lowest risk category investment option is
Cer-tificate of Deposit (CD) issued by banks and Financial Institutions (FI). Allowed in 1989,
CDs were one of RBI‟s measures to deregulate the cost of funds for banks and FIs. A CD is a negotiable
promissory note, secure and short term, of up to a year, in nature.
Although RBI allows CDs up to one-year maturity, the maturity most quoted in the market is for 90 days.
COMMERCIAL PAPERS - Commercial papers [CPs] are negotiable short-term unsecured promissory notes
with fixed maturities, issued by well-rated organizations. These are generally sold on discount basis.
Organiza-tions can issue CPs either directly or through banks or merchant banks
[called as dealers]. These instruments are normally issued in the multiples of five crores for
30/45/60/90/120/180/270/364 days
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