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Financial Institutions and Markets

Financial Institutions and Markets

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Published by: srabindra6290 on Dec 04, 2009
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05/31/2013

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8/5/20091
Financial Institutions andmarkets
EXPGP(PT)-2008-11Session 9
Money Markets contd…
 
8/5/20092
3
Call Money / Notice Money
What is it ?
The call money market is the most liquid of the short term money marketsegments. Call Money/ notice money represent the borrowings made for aperiod of 1 day to a fortnight.
The call/notice money market forms an important segment of the IndianMoney Market. Under call money market, funds are transacted onovernight basis and under notice money market, funds are transacted forthe period between 2 days and 14 days.
Participants in the call money market
 – 
All scheduled commercial banks
( except RRBs)
 – 
All co operative banks
other than land development banks
 – 
Primary dealers
like SBI-Discount and Finance House of India
(SBIDFHI)
and Securities Trading Corporation of India Limited
( STCI)
and others.
 
4
Call Money / Notice Money …. Contd..
SBIDFHI :
It was set up jointly by RBI, SBI ,some other public sector banks and someother financial institutions in 1988. The main function of DFHI was tosmoothen the short term liquidity imbalances by developing an activesecondary market for the money market instruments in general ( basicallyto play the role of a market maker).
 
8/5/20093
5
Call Money / Notice Money …. Contd..
Securities Trading Corporation of India Ltd.
(STCI)was a similar institutionestablished by Reserve Bank of India (RBI) in May 1994, jointly with public sectorbanks and all-India financial institutions.
the main objective was to foster the development of an active secondary marketfor Government securities and bonds issued by Public sector undertakings, FIs,Corporates etc.
The Company was incorporated with an authorised and paid up capital of Rs. 500crores of which RBI contributed 50.18 per cent. RBI later on divested its shares infavour of other shareholders.
Presently Bank of India is the major shareholder with 29% followed by State Bankof India and Associates 10.5%, and IDFC 10%. The remaining portion is held byother Public Sector Banks and Financial Institutions.
 
6
Call Money / Notice Money …. Contd..
Primary Dealers
are a group of market makers in government securitiesintroduced in India in 1996 by RBI.
Principal objectives were
to strengthen the liquidityavailable in the moneymarket securities, and to increase the transaction volume in the secondarymarket for efficient price discovery.
Eligibility Criteria for being a PD:
Should be incorporated under Companies Act,1956 and should have previousexperience in securities business primarily Govt. securities.
Should have minimum net owned fund of Rs.50 crores or above. Net owned fundsrepresented by paid up capital, free reserves and balance in share premiumaccount and other capital reserves less accumulated loss and book value of intangible assets).
Some of the major PDs are ----
Currently around
11 PDs
are operating . Some of them are :
Stand Alone Primary dealers
like :SBI-DFHI,STCI Primary dealer Ltd. ICICI Securitiesand primary Dealership ltd, PNB Gilts ltd., IDBI Gilts ltd.,
Bank Primary dealers
: BOB, Can Bank, HDFC Bank, HSBC Bank, Kotak MahindraBank etc.

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