1. Money Market in India
By,
L Kaushal
M LEARNING kaushal@thefinancialplanners.in
S Made Simple

2. Overview of Financial Market
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3. Six horses
What, Why, Who, Which, How and Where?
Why: The Need.
What: The Definition.
Who: The Players.
Which & How: The Products & Process.
Where: The Resources
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4. The Need
Short term funds by Banks.
Need to keep the SLR as prescribed
Need to keep the CRR as prescribed
Optimize the yield on temporary surplus funds
Regulate the liquidity and interest rates in the conduct of
monetary policy to achieve the broad objective of price
stability, efficient allocation of credit and a stable foreign
exchange market
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5. The Defination
Money Market is "the centre for dealings, mainly
short-term character, in money assets.
Itmeets the short-term requirements of borrower and
provides liquidity or cash to the lenders.
It is the place where short-term surplus investible
funds at the disposal of financial and other institutions
and individuals are bid by borrowers, again comprising
Institutions, individuals and also the Government itself"
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6. The Defination (Cont)
Money market refers to the market for short term
assets that are close substitutes of money, usually
with maturities of less than a year.
A well functioning money market provides a
relatively safe and steady income-yielding avenue.
Allows the investor institutions to optimize the yield
on temporary surplus funds.
Instrument of Liquidity adjustment by Central Bank.
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7. The Players
Reserve Bank of India
SBI DFHI Ltd (Amalgamation of Discount & Finance
House in India and SBI Gilts in 2004)
Commercial Banks, Co-operative Banks and Primary
Dealers are allowed to borrow and lend.
Specified All-India Financial Institutions, Mutual Funds,
and certain specified entities are allowed to access to
Call/Notice money market only as lenders
Individuals, firms, companies, corporate bodies, trusts and
institutions can purchase the treasury bills, CPs and CDs.
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8. The Products and Process
Certificateof Deposit (CD)
Commercial Paper (C.P)
Inter Bank Participation Certificates
Inter Bank term Money
Treasury Bills
Call Money
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9. Certificate of Deposit (CD)
CDs are short-term borrowings in the form of a Promissory
Notes having a maturity of not less than 15 days up to a
maximum of one year.
CD is subject to payment of Stamp Duty under Indian
Stamp Act, 1899 (Central Act)
They are like bank term deposits accounts. Unlike
traditional time deposits these are freely negotiable
instruments and are often referred to as Negotiable
Certificate of Deposits
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10. Features of CD
CDs can be issued by all scheduled commercial
banks except RRBs (Regional Rural Banks)
Minimum period 15 days
Maximum period 1 year
Minimum Amount Rs 1 Lakh and in multiples of Rs. 1
Lakh
CDs are transferable by endorsement
CRR & SLR are to be maintained
CDs are to be stamped
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11. Commercial Papers (CP)
Commercial Paper (CP) is an unsecured money
market instrument issued in the form of a promissory
note.
Who can issue Commercial Paper (CP)
Highly rated corporate borrowers, primary dealers
(PDs) and satellite dealers (SDs) and all-India financial
institutions (FIs)
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12. Eligibility to Issue CP
a) The tangible net worth of the company, as per the
latest audited balance sheet, is not less than Rs. 4 Cr.
b) The working capital (fund-based) limit of the company
from the banking system is not less than Rs.4 Cr.
The borrower account of the company is classified as
c)
a Standard Asset by the financing bank/s.
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13. Rating Requirement
All eligible participants should obtain the credit rating for
issuance of Commercial Paper from
Credit Rating Agencies are..
› Credit Rating Information Services of India Ltd. (CRISIL)
› Investment Information and Credit Rating Agency of India Ltd.
(ICRA)
› Credit Analysis and Research Ltd. (CARE)
› Duff & Phelps Credit Rating India Pvt. Ltd. (DCR India)
 The minimum credit rating shall be P-2 of CRISIL or such
equivalent rating by other agencies
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14. Maturity
CP can be issued for maturities between a minimum
of 15 days and a maximum up to one year from the
date of issue.
 If the maturity date is a holiday, the company would
be liable to make payment on the immediate preceding
working day.
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15. To Whom Issued
CP is issued to and held by individuals, banking
companies, other corporate bodies registered or
incorporated in India and unincorporated bodies,
Non-Resident Indians (NRIs) and Foreign
Institutional Investors (FIIs).
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16. Meaning of Repo
Itis 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 (T Bills, Central /
State Govt Securities).
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17. Benefits of Repo
Repo helps banks to invest surplus cash.
Ithelps investor to achieve money market returns with
sovereign risk
It helps borrower to raise funds at better rates.
Bank can use Repo deals as a convenient way of
adjusting SLR / CRR positions.
RBI Uses Repo and Reverse Repo as Instruments for
liquidity adjustment in the system.
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18. Call 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 loans are of short-
term duration varying from 1 to 14 days.
The money that is lent for one day in this market is
known as "Call Money", and if it exceeds one day (but
less than 15 days) it is referred to as "Notice Money".
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19. Gilt Edge Securities
 The Term Government Securities encompass all
bonds and T Bills issued by Central Government
and State Government.
 These Securities are normally referred to as “gilt
edged” as repayments of principal as well as interest
are totally secured by Sovereign Guarantee
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20. T Bills
 Treasury bills, commonly referred to as T-Bills are
issued by Government of India against their short
term borrowing requirements with maturities
ranging between 14 to 364 days.
 All these are issued at a discount-to-face value. For
example a Treasury bill of Rs. 100.00 face value
issued for Rs. 91.50 gets redeemed at the end of
it's tenure at Rs. 100.00.
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21. Who can Invest in T Bills?
Banks, Primary Dealers, State Governments,
Provident Funds, Financial Institutions, Insurance
Companies, NBFCs, FIIs (as per prescribed norms),
NRIs & OCBs can invest in T-Bills.
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22. The Resources
 RBI’ssite http://rbi.org.in
 SBI DFHI’s site http://sbidfhi.com/
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23. LearningMadeSimpleTM
Learning Made Simple is initiative taken by few people earlier
related to the Corporate World whose aim is to provide quality
education and training to those who wish to excel in their career
path. Learning Made Simple is an association who works on a no
profit no loss basis and provide training and development in the
era of Financial Planning, Financial Management, AMFI, NCFM,
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Development, Goal Setting, Marketing Management, Behavioral
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with us by sending email on kaushal@thefinancialplanners.in

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