Money Market Instrument

What is Money Market Instrument ? Features of Money Market Instruments

Money Market is a market where lending and borrowing of funds is being done 1. Promotes Liquidity and Safety of funds .
for min period of 1 day and maximum 365 days (Less than a year) between 2. Helps in Government Monetary Policy & Financial Mobility
banks , Corporates Institutions FIIs ,NBFCs and Mutual Funds Companies 3. Equilibrium between Demand and Supply of funds .
4. Money market assists the short-term fund users to fulfill their needs at a
It gives the Liquidity of funds to Investor with Minimum returns so the very reasonable rate.
Institutions can demand money at the time of any emergency with minimum 5. Facilitates the smooth functioning of Commercial banks and also helps in
benefits . regulating the economy .

Examples of Money Market Instrument

• Call Money - Inter bank market where funds are borrowed and lent for 1 day or less.
• Notice Money - IInter bank market where funds are borrowed and lent for >1 day and upto 14 days .
• Treasury Bills – Issued by RBI and are Zero Risk at present three types of T-Bills (91 D, 182 D & 364 D)
• Cash Management Bills – Issued by RBI issued for less then 91 days only .
• Certificate of Deposits (CDs) – Issued by Commercial Banks and other financial institutions having period from
15days to 1 year with min amount Rs.1 Lacs .
• Commercial Paper –Issued by large corporates and FIs maturity period is min 7days to 1 year
• Commercial Bills –Issued by all India FIs, NBFCs, SCBs, Merchant banks & Mutual funds.