The document discusses various money market instruments in India including treasury bills, repurchase agreements, commercial papers, certificates of deposits, call money market, and collateralized borrowing and lending obligations. Money market refers to markets for short-term debt instruments with maturities of one year or less. It includes various submarkets like the inter-bank market and allows players like banks, corporations, and governments to borrow and lend in the short-term. Common characteristics of money market instruments are their short maturities of one year or less, low credit risk, high liquidity, and large transaction volumes.

1. MONEY MARKET INSTRUMENTS

2. MONEY MARKETMoney market means market where money or its equivalent can be traded, Synonym of liquidityIt is a wholesale market of short term debt instrument ,Short term maturities i.e. one or less than one year are tradedIt is not a single homogeneous market, it comprises of several submarket like call money market, acceptance & bill marketThe component of Money Market are the commercial banks, acceptance houses & NBFC.Hence, money market is a market where short term obligations such as Treasury bills, Call/notice money, Certificate of Deposits, Commercial papers and Repos are bought and sold

3. MONEY MARKET

4. CHARACTERISTICS OF MONEY MARKET INSTRUMENTSShort-term borrowing and lendingLow credit riskHigh liquidityHigh volume of lending and borrowing

5. Players in Money Market

6. Composition of Money Market

7. Structure of Indian Money Market

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9. Money market InstrumentsTreasury BillsRepurchase AgreementsRepoReverse RepoCommercial PapersCertificate of DepositsBanker’s Acceptance

10. TREASURY BILLST-Bills are issued by GOI against their short term borrowing requirements with maturities ranging between 14 to 364 days. 3 types of T-Bills issued through auctions 91-day (Auctioned every week on Wednesdays)182-day and 364-day (Auctioned alternate Wednesdays)No treasury bills issued by State GovernmentsT-bills are purchased for a price that is less than their par value; when they mature, the government pays the holder the full par valueTypes of Bills: on tap bills, ad hoc bills, auctioned T- billsAvailable both in primary market as well as secondary marketTreasury bills are available for a minimum amount of Rs.25,000 and in multiples of Rs. 25,000. Treasury bills are issued at a discount and are redeemed at par T-bills are considered to be the safest investmentsThey are exempt from state and local taxes

11. REPURCHASE AGREEMENTSREPO - the buyer purchases the securities with an agreement to resell the same to the seller on an agreed date at a predetermined priceREVERSE REPO - when viewed from the perspective of the buyer of the securitiesThe Repo/Reverse Repo transaction can only be done at Mumbai between parties approved by RBI and in securities as approved by RBI (Treasury Bills, Central/State Govt securities)Repos are safe collateral for loansIt is a transaction in which two parties agree to sell and repurchase the same securityUsed for overnight borrowing and used by those who deal in government securities

12. COMMERCIAL PAPERSIt is a short term unsecured loan issued by a corporation typically financing day to day operation; In the form of a promissory noteUsually issued with fixed maturity between 1 to 270 daysVery safe investment and Yield higher returns as compared to T-BillsIssued by corporates to impart flexibility in raising working capital resources at market determined ratesOnly company with high credit rating issues CPsCommercial Papers are actively traded in the secondary marketWho can issue Commercial Paper (CP) Highly rated corporate borrowers, primary dealers (PDs) and satellite dealers (SDs) and all-India financial institutions (FIs)

13. Certificate of DepositCD is a promissory note issued by a bank in form of a certificate entitling the bearer to receive interest Time deposit with a bankAlso referred to as Negotiable Certificate of DepositsFunds can not withdrawn before maturity without paying a penaltyCDs have specific maturity date, interest rate and it can be issued in any denominationRanges from three months to five years and restricts the holders to withdraw funds on demandMain advantage of CD is their safetyThe returns on certificate of deposits are higher than T-Bills because it assumes higher level of risk

14. Call Money MarketThe call money market is an integral part of the Indian Money MarketDay-to-day surplus funds (mostly of banks) are tradedThe loans are of short-term duration varying from 1 to 14 daysThe money that is lent for one day in this market is known as "Call Money", and if it exceeds one day (but less than 15 days) it is referred to as "Notice Money".

15. Collateralized Borrowing and Lending Obligation (CBLO)It is a money market instrument as approved by RBI, is a product developed by CCIL. CBLO is a discounted instrument available in electronic book entry form for the maturity period ranging from one day to ninety Days (can be made available up to one year as per RBI guidelines). In order to enable the market participants to borrow and lend funds, CCIL provides the Dealing System through:- Indian Financial Network (INFINET), a closed user group to the Members of the Negotiated Dealing System (NDS) who maintain Current account with RBI.- Internet gateway for other entities who do not maintain Current account with RBI.What is CBLO?CBLO is explained as under: • An obligation by the borrower to return the money borrowed, at a specified future date; • 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; • An underlying charge on securities held in custody (with CCIL) for the amount borrowed/lent.

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