T Bills in Money Market

Money Market
• It is not a single market but collection for several instruments
• Wholesale market of short-term debt instrument –without collateral
• Main players are :RBI, DFHI, MF, Insurance Cos, Banks, NBFCs,
Provided & PDs
• DD & SS for short term credit shape the dynamics of the market
• Why MM exist: To provide a balancing mechanism to even out the
mismatch of demand & supply
• Role of RBI: As a regulator as well as participant
Instruments
• Treasury Bills
• Cash Management Bills
• Call Money Market-Call(overnight) tom short notice(14 days)
• Commercial Papers(CPs)
• Certificate of Deposits (CDs)
• CBLO
• Commercial Bills
Treasury Bills
Types of Treasury Bills:

 Ad-hoc (Discontinued since 1994 with WMA system)

 91-days (Money Market Reference Rate with auction
system)
 182-days (Ceased to be issued since 1992. Reintroduced in 2005)

 364-days (Introduced Since 1992)

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TBs: Characteristics
• They are negotiable instrument
• Highly Liquid
• No Default Risk
• Assure Yield
• No Scrip. SGL and CSGL
TBs market : Some Characteristics

 Throughout the period the yield on 364-day TBs has

been higher than the yield on 91-day TBs.

 The 364-day TBs market has been more volatile than

91-day TBs market during the liberalization period
1993-94 to 2006-07

 The relative share of 364- day TBs are higher than

91-day and 182- day TBs
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Cash Management Bills
• Same as T-Bills
• Only Difference is : Tenure is less than 91 days
• Introduced in 2010
• Qualified for SLR maintenance