Professional Documents
Culture Documents
Money Market
Call Money/Notice Money
Term Money
Certificate of Deposit (CD)
Commercial Paper (C.P)
Inter Bank Participation Certificates
Treasury Bills
Collateralized Borrowing and Lending Obligation
(CBLO)
Call Money/Notice Money Market
The call money market is an integral part of the Indian
Money Market, where the day-to-day surplus funds
(mostly of banks) are traded.
The money that is lent for one day in this market is known
as "Call Money",
if it exceeds one day (but less than 15 days) it is referred
to as "Notice Money".
Call Money Market
Limit:
Average borrowing
Fortnight: can not exceed 100% of Tier-I and II capital of the previous year.
On any given day- 125%
Average Lending:
Fortnight: 25%
On any day: 50%
Certificate of Deposit
1. CDs are short-term borrowings BY BANKS in the form of
Promissory Notes having a maturity of not less than 7 days up
to a maximum of one year.
Minimum period 7 days
Maximum period up to 1 year
Minimum Amount Rs 1 lac and in multiples of Rs. 1 lac
2. FIs may issue CDs within the overall umbrella limit fixed by
RBI – i.e. issue of CDs together of other MM instruments
should not exceed 100 % of its Net Owned Fund.
FIs issue CDs for a period of 1 year to 3 years.
CD is subject to payment of Stamp Duty under Indian Stamp
Act, 1899 (Central Act)
Features of CD
CDs are transferable by endorsement
Issued on discount
Amount Payable: Face Value (FV)=P+Px(n/12)xR%
Commercial Paper
Commercial Paper (CP) is an unsecured money market
instrument issued in the form of a promissory note by
corporates/PDs/FIs
Introduced in 1990.
Who can issue Commercial Paper (CP)
Highly rated corporate borrowers, primary dealers (PDs) and
all-India financial institutions (FIs)
Eligibility for issue of CP
Y = Yield
P= Price
D =Days to maturity
Example
91 days treasury bills maturing on 6-12-2008
Purchased on 12-10-2008
Rate quoted is Rs.99.1489 per Rs100
(100-99.1489)*365*100= 31065.15
----------------------------
(99.1489*55 days) =5453.18
=5.70%
Interbank Participation certificate
IBPC: Sell loans and credit to lending bank for
temporary period.
Features:
With risk sharing
Min Period-91 days
Max period-180 days
Non risk sharing
Period limited to 90 days
Features:
It is a transaction in which two parties agree to sell and repurchase the same
security.
Under such an agreement the seller sells specified securities with an agreement to
repurchase the same at a mutually decided future date and a price
The Repo/Reverse Repo transaction can only be done at Mumbai between parties
approved by RBI and in securities as approved by RBI .
Repo
Uses of Repo
It helps banks to invest surplus cash
It helps investor achieve money market returns with sovereign
risk.
An SLR surplus and CRR deficit bank can use the Repo deals as a
convenient way of adjusting SLR/CRR positions simultaneously.