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Treasury bills are issued by Reserve bank of India on behalf of the Government of India.
Such bills are sold at fortnightly auctions. The Discount House regularly participates in
such auctions. Moreover, it provides a ready market to other institutions/individuals to
buy or sell the Treasury Bills. It purchases the same either as outright purchase or on
repos basis. Repos mean the right to re-purchase the same bills again. For this purpose
the DFHI quotes two way prices with fine spread. Such operations in Treasury Bills
impart greater flexibility to banks in their funds management. Moreover, with the
creation of a secondary market for treasury Bills, corporate bodies and other institutions
could also invest their short term surplus funds in such bills.
Call Money Market and Term Deposit: DFHI has been permitted by the Reserve bank of
India to operate in the inter-bank call money market, both as lender and borrower of
overnight call and notice money up to 14 days. DFHI also renders service to banks in the
call money market by arranging or placing funds for banks.
The DFHI is authorized to argument its resources with lines of credit from sector and
refinance lines from the Reserves bank, The amount and the rate of interest charged by
Reserve Bank on refinance would be flexible, so that Reserve Bank can have its impact
on the money market by varying the quantum of refinance and the rate of interest thereon.
Small Industries Development Bank of India:
In the field of financing of small scale industries in India, a separate apex development
bank has started its operations from April 2, 1990. The small industries Development
Bank of India (SIDBI) has been set up as an Act of parliament and the principal financial
institution for promotion, financing and development of industry in the tiny and small
scale sector. It coordinates the functions of other institutions engaged in similar activities.
1. Refinancing of term loans granted by banks and other eligible financial institutions,
namely the state Financial Corporation and State industrial Development Corporations.
2. Direct discounting as well as re-discounting of bills arising out of sale of machinery of
capital equipment by manufacturers in small scale sector on deferred credit.
3. Equity type assistance under national Equity Funds and by way of seed capital to
entrepreneurs
4. Re-discounting of short term bills arising out of sale of products of small scale sector.
5. Sources support to National Small industries Corporation and other institutions
concerned with small industries
6. Share capital and resources support to factoring organizations.
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