Tenets of Money Market in India

Tenets of Money Market in India

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In India, the organized money market is not one market It is the amalgamation of various instrument markets. Below the instruments that are necessary pieces of the Indian currency market framework.

1. Call or Notice Money - The Indian money market's submarkets are the call money, notice money, and term money markets. The funds provided by these markets are very short-term. borrowing and lending for one day from the call money market. In contrast, the notice money market's lending and borrowing terms range from two to fourteen days. Additionally, "Term Money" is used when borrowing and lending funds last longer than 14 days.

2. T-Bills - Bills are a submarket of the Treasury Bill market in India. There are two sorts of the bill in the currency market. They are commercial bills and treasury bills. T-Bills are another name for treasury bills; the central bank issues T-bills on behalf of the government, whereas Commercial Bills are issued by financial institutions. Although they are issued at a discount and repaid at par at maturity, Treasury bills do not pay interest. There is no chance of default with T-bills; It is a secure investment tool.

3. Commercial Bills - Similar to the bill of exchange, the commercial bill is a money market instrument; It is issued by a business to raise funds for immediate requirements. The commercial bill market in India is dominated by financial institutions and banks.

4. Deposits Certificates - also referred to as CDs are money market instruments that can be traded. Similar to a promissory note, it The amounts, terms, and rates of each institution are different. CDs should not be traded publicly, and they are not traded on any exchange. Overall foundations issue endorsement of store at markdown all over esteem. CDs can be issued at a floating rate by banks and other financial institutions.

5. Commercial Paper - Another money market instrument in India is commercial paper. Commercial paper is also known as CP. CP alludes to a transient unstable currency market instrument. Commercial paper is used as a promissory note by large, credit-worthy businesses. For CPs, there is no collateral support. As a result, the instrument can only be issued by large businesses with considerable financial strength.

6. Money Market Mutual Funds (MMMFs) The RBI introduced money-market mutual funds in 1992, and since 2000, SEBI has regulated them. It is an open-ended mutual fund that invests in debt securities with a short maturity. This kind of mutual fund only invests in money market instruments.

The term "Repo" refers to the agreement of repurchase. India has had it since December 1992. An agreement to repurchase a security at a predetermined date and rate is referred to as REPO. The repo is used as an overnight borrowing by those who deal in government securities.