1. 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". Term Money refers to Money lent for 15 days or more in the
Inter Bank Market.
Banks borrow in this money market for the following purpose:
• To fill the gaps or temporary mismatches in funds
• To meet the CRR & SLR mandatory requirements as stipulated by the Central bank
• To meet sudden demand for funds arising out of large outflows.
Thus call money usually serves the role of equilibrating the short-term liquidity position of
banks
Call Money Market Participants :
1.Those who can both borrow as well as lend in the market - RBI (through LAF) Banks, PDs
2.Those who can only lend Financial institutions-LIC, UTI, GIC, IDBI, NABARD, ICICI and
mutual funds etc.
Reserve Bank of India has framed a time schedule to phase out the second category out of
Call Money Market and make Call Money market as exclusive market for Bank/s & PD/s.
The most active segment of the money market has been the call money market, where the
day to day imbalances in the funds position of scheduled commercial banks are eased out.
The call notice money market has graduated into a broad and vibrant institution .
Call/Notice money is the money borrowed or lent on demand for a very short period. When
money is borrowed or lent for a day, it is known as Call (Overnight) Money. Intervening
holidays and/or Sunday are excluded for this purpose. Thus money,
borrowed on a day and repaid on the next working day, (irrespective of the number of
intervening holidays) is "Call Money".
When money is borrowed or lent for more than a day and up to 14 days, it is "Notice
Money". No collateral security is required to cover these transactions.

2. Discount and Finance House of India (DFHI)
The Working Group of Money Market, in its Report submitted in 1987, recommended, among
other things, that a Finance House should be set up to deal in short-term money market
instruments.
As a follow-up on the recommendations of the Working Group, the Reserve Bank in India, in
collaboration with the public sector banks and financial institutions, set up the Discount and
Finance House of India Limited (DFHI) in.
April 1988. DFHI is the apex body in the Indian money market and its establishment is a major
step towards developing a secondary market for money instruments. DFHI, which commenced
its operations from April 25, 1988, deals in short-term money market instruments.
As a matter of policy, the aim of the DFHI is to increase the volume of turnover rather than to
become the repository of money market instruments. The initial paid up capital of DFHI is Rs.
150 crores.
Apart from this, it has lines of refinance from RBI and a line of credit from the consortium of
public sector banks.
As the apex agency in the Indian money market, the DFHI has been playing an important role
ever since its inception. It has been promoting the active participation of the scheduled
commercial banks and their subsidiaries, state and urban cooperative banks and all-Indian
financial institutions in the money market.
The objective is to ensure that short-term surplus and deficits of these institutions are
equilibrated at market-related rates through inter-bank transactions and various money market
instruments.
In 1990-91 the DFHI opened its branches at Delhi, Calcutta, Madras, Ahmedabad and Banglore
in order to decentralize its operations and provide money market facilities at the major money
market centers in the country.

3.  Discount and Finance House of India Ltd. (DFHI), a unique institution
of its kind, was set up in April 1988. The share capital of DFHI is Rs
200 crores, which has been subscribed by Reserve Bank of India
(10.5%), Public sector banks (62%) and Financial Institutions
(26.6%). The discount has been established to deal in money market
instruments in order to provide liquidity in the money market. Thus
the task assigned to DFHI is to develop a secondary market in the
existing money market instruments.
The establishment of a discount House was recommended by a Working
Group on Money market. The main objective of DFHI is to facilitate the
smoothening of the short term liquidity imbalances by developing an active
money market and integrating the various segments of the money market.
At preset DFHI’s activities are restricted to:
1. dealing in 91 days and 364 days Treasury Bills
2. re-discounting short term commercial bills.
3. participating in the inert bank call money, notice money and term
deposits and
4. Dealing in Commercial Paper and Certificate of deposits.
5. Government dated Securities
Treasury bills are issued by Reserve bank of India on behalf of the
Government of India. Such bills are sold at fortnightly auctions. The
Discount House regularly participates in such auctions. Moreover, it
provides a ready market to other institutions/individuals to buy or sell the
Treasury Bills. It purchases the same either as outright purchase or on repos basis. Repos mean the right to re-
purchase the same bills again. For this purpose the DFHI quotes two way
prices with fine spread. Such operations in Treasury Bills impart greater
flexibility to banks in their funds management. Moreover, with the creation
of a secondary market for treasury Bills, corporate bodies and other
institutions could also invest their short term surplus funds in such bills.
Re-discounting of commercial Bills:
The Discount House aims at imparting liquidity to Commercial bills which
have already been discounted by banks and financial institutions. It further
re-discounts them and also enables banks and other institutions to re-
discount from it such bills. For this purpose DFHI announces its bid and
offers re-discount rates on a fortnightly basis.
Call Money Market and Term Deposit: DFHI has been permitted by the
Reserve bank of India to operate in the inter-bank call money market, both
as lender and borrower of overnight call and notice money up to 14 days.

4. DFHI also renders service to banks in the call money market by arranging
or placing funds for banks.
The DFHI is authorized to argument its resources with lines of credit from
sector and refinance lines from the Reserves bank, The amount and the
rate of interest charged by Reserve Bank on refinance would be flexible, so
that Reserve Bank can have its impact on the money market by varying the
quantum of refinance and the rate of interest thereon.
Small Industries Development Bank of India:
In the field of financing of small scale industries in India, a separate apex
development bank has started its operations from April 2, 1990. The small
industries Development Bank of India (SIDBI) has been set up as an Act of
parliament and the principal financial institution for promotion, financing and
development of industry in the tiny and small scale sector. It coordinates
the functions of other institutions engaged in similar activities.
The SIDBI was established as a wholly-owned subsidiary of the Industrial
Development bank of India. It has taken over IDBI’s financing activities
relating to the small scale sector.
The major activities undertaken by this bank are as follows:
1. Refinancing of term loans granted by banks and other eligible
financial institutions, namely the state Financial Corporation and
State industrial Development Corporations.
2. Direct discounting as well as re-discounting of bills arising out of
sale of machinery of capital equipment by manufacturers in small
scale sector on deferred credit.
3. Equity type assistance under national Equity Funds and by way of
seed capital to entrepreneurs
4. Re-discounting of short term bills arising out of sale of products of
small scale sector.
5. Sources support to National Small industries Corporation and other
institutions concerned with small industries
6. Share capital and resources support to factoring organizations

5. Overview of financial institutions
Financial institutions are those Banking institutions which have a legal right to give away money for
interest on certain forms. Credit is being tightened up, people are upside down on their homes, and oil
is starting to restrict mobility of most Americans. Yet the win attitude has not come forth from the
financial sectors. They are just worried how they will come out of this economic mess. Everyone
affected by this downturn is worried about the same thing. Being an optimist I see the most incredible
opportunity for these institutions. The opportunity is to help families and small businesses figure out
what they need to do to weather this economic storm. Let us look at some background then I can take
you through the opportunity portion of this leadership idea.
Social responsibility plays an important role in upcoming financial institutions. The core of this is
people. People who may have hit on hard times, maybe just need more cash to pay for the elevated
prices on food, utilities and gas for the family car. The families affected have solutions that may be
limited by what they already know. Families may take the route of drawing down their savings
accounts, 401ks, IRAs or stop any savings altogether. There are groups out there working on
improving family credit worthiness and saving homes from the foreclosure markets, which is a good
thing to do.
Leadership qualities
It is the personal touch that can show leadership qualities. It raises the awareness of what families are
facing now, not tomorrow. You can send out little flyers or even little forms for them to fill out. That is
impersonal and usually won't help anyone with the hit and miss of mailers. This will open the door of
opportunity for clients to save more and have a longer term view. Assist them in confronting their
spending behavior. There are little things that one can do to save bundles of money. So many people
have a phone but do they have the right money saving service? Are they watering their lawn too
much? Do they leave the lights on in every room? Is the air conditioner set too low? When they shop
do they go 5 or 10 miles to save fifty cents on a product?
When they do go shopping, are the routes taken saving gas or wasting it? Some people pass right by
the store that they will go to the following day. They should have there shopping list done the night
before and just pick up what they need on the way back home.
Home loans require collateral and with this, make sure you do have that before engaging on the loan
and also do make sure that you are able to pay off your loan within the given duration. When you are
considering on taking a loan, be aware of how secure the financial institution is. Make an effort to know
more of your financial institution. Do some research background on them and make comparison on
who can give you the better deal and services.
People often take for granted as taking a loan is not free of cost as it comes for a price. To have in
mind all these factors the financial institutions are upgrading day by day. Don't take things lightly as if
you are not aware of the procedure, with one mistake you can be charged under the legal law. And so,
read carefully for all your contracts/agreements. Make sure that you have all the right information that
is needed for example, the interest rate, foreclosure, payment and etc.
Home loans are useful loans that come in handy with an easy procedure but security should be
offered. Security is the most important factor of all loans especially home loans. Always remember to
get yourself a secure home loan where you don't need to always worry about it every time. Financial
institutions are not an easy go at times hence you don’t want to be at the losing end as in terms of
debts. . If you have gotten yourself a trustworthy financial institution and an agreement/contract that
can hardly be breached, you have successfully gained a secured deal for your future. Financial
institutions are providing loans with interest so that they have an upper hand on the debtor. This
usually happens everywhere. One could probably get low interest on student loan because there is
some consideration on that.
Read More: Overview On Financial Institutions - Zuuply.com
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Treasury bill marketttt

6. ttttTreasury Bills:
Just like commercial bills which represent commercial debt, treasury bills represent short-term borrowings
of the Government. Treasury bill market refers to the market where treasury bills are bought and sold.
Treasury bills are very popular and enjoy higher degree of liquidity since they are issued by the
government.
Meaning and Features of Treasury Bills:
A treasury bills nothing but promissory note issued by the Government under discount for a specified
period stated therein. The Government promises to pay the specified amount mentioned therein to the
bearer of the instrument on the due date. The period does not exceed a period of one year. It is purely a
finance bill since it does not arise out of any trade transaction. It does not require any ‘grading’ or’
endorsement’ or ‘acceptance’ since it is clams against the Government. Treasury bill are issued only by
the RBI on behalf of the Government. Treasury bills are issued for meeting temporary Government
deficits. The Treasury bill rate of discount is fixed by the RBI from time-to-time. It is the lowest one in the
entire structure of interest rates in the country because of short-term maturity and degree of liquidity and
security.
Types of Treasury Bills
In India, there are two types of treasury bills viz. (I) ordinary or regular and (ii) ‘ad hoc’ known as ‘ad hocs’
ordinary treasury bills are issued to the public and other financial institutions for meeting the short-term
financial requirements of the Central Government. These bills are freely marketable and they can be
brought and sold at any time and they have secondary market also.
On the other hand ‘ad hocs’ are always issued in favour of the RBI only. They are not sold through tender
or auction. They are purchased by the RBI on top and the RBI is authorised to issue currency notes
against them. They are marketable sell them back to the RBI. Ad hocs serve the Government in the
following ways:
 They replenish cash balances of the central Government. Just like State Government get advance
(ways and means advances) from the RBI, the Central Government can raise finance through these
ad hocs.
 They also provide an investment medium for investing the temporary surpluses of State
Government, semi-government departments and foreign central banks.
On the basis of periodicity, treasury bills may be classified into three they are:
1. 91 Days treasury bills,
2. 182 Days treasury bills, and
3. 364 Days treasury bills.

7. Ninety one days treasury bills are issued at a fixed discount rate of 4% as well as through auctions. 364
days bills do not carry any fixed rate. The discount rate on these bills are quoted in auction by the
participants and accepted by the authorities. Such a rate is called cut off rate. In the same way, the rate is
fixed for 91 days treasury bills sold through auction. 91 days treasury bills (top basis) can be rediscounted
with the RBI at any time after 14 days of their purchase. Before 14 days a penal rate is charged.
Operations and Participants
The RBI holds day’s treasury bills (TBs) and they are issued on top basis throughout the week. However,
364 days TBs are sold through auction which is conducted once in a fortnight. The date of auction and
the last date of submission of tenders are notified by the RBI through a press release. Investors can
submit more than one bid also. On the next working day of the date auction, the accepted bids with prices
are displayed. The successful bidders have to collect letters of acceptance from the RBI and deposit the
same along with cheque for the amount due on RBI within 24 hours of the announcement of auction
results.
Institutional investors like commercial banks, DFHI, STCI, etc, maintain a subsidiary General Ledger
(SGL) account with the RBI. Purchases and sales of TBs are automatically recorded in this account
invests who do not have SGL account can purchase and sell TBs though DFHI. The DFHI does this
function on behalf of investors with the helps of SGL transfer forms. The DFHI is actively participating in
the auctions of TBs. It is playing a significant role in the secondary market also by quoting daily buying
and selling rates. It also gives buy-back and sell-back facilities for period’s upto 14 days at an agreed rate
of interest to institutional investors. The establishment of the DFHI has imported greater liquidity in the TB
market.
The participants in this market are the followers:
1. RBI and SBI
2. Commercial banks
3. State Governments
4. DFHI
5. STCI
6. Financial institutions like LIC, GIC, UTI, IDBI, ICICI, IFCI, NABARD, etc.
7. Corporate customers
8. Public
Through many participants are there, in actual practice, this market is in the hands at the banking sector.
It accounts for nearly 90 % of the annual sale of TBs.

8. Importance of Treasury Bills:
 Safety: Investments in TBs are highly safe since the payment of interest and repayment of principal
are assured by the Government. They carry zero default risk since they are issued by the RBI for
and on behalf of the Central Government.
 Liquidity: Investments in TBs are also highly liquid because they can be converted into cash at any
time at the option of the inverts. The DFHI announces daily buying and selling rates for TBs. They
can be discounted with the RBI and further refinance facility is available from the RBI against TBs.
Hence there is a market for TBs.
 Ideal Short-Term Investment: Idle cash can be profitably invested for a very short period in TBs.
TBs are available on top throughout the week at specified rates. Financial institutions can employ
their surplus funds on any day. The yield on TBs is also assured.
 Ideal Fund Management: TBs are available on top as well through periodical auctions. They are
also available in the secondary market. Fund managers of financial institutions build portfolio of TBs
in such a way that the dates of maturities of TBs may be matched with the dates of payment on their
liabilities like deposits of short term maturities. Thus, TBs help financial manager’s it manage the
funds effectively and profitably.
 Statutory Liquidity Requirement: As per the RBI directives, commercial banks have to maintain
SLR (Statutory Liquidity Ratio) and for measuring this ratio investments in TBs are taken into
account. TBs are eligible securities for SLR purposes. Moreover, to maintain CRR (Cash Reserve
Ratio). TBs are very helpful. They can be readily converted into cash and thereby CRR can be
maintained.
 Source Of Short-Term Funds: The Government can raise short-term funds for meeting its
temporary budget deficits through the issue of TBs. It is a source of cheap finance to the
Government since the discount rates are very low.
 Non-Inflationary Monetary Tool: TBs enable the Central Government to support its monetary
policy in the economy. For instance excess liquidity, if any, in the economy can be absorbed through
the issue of TBs. Moreover, TBs are subscribed by investors other than the RBI. Hence they cannot
be mentioned and their issue does not lead to any inflationary pressure at all.( Recommended
reading: Treasury bills and inflation control )
 Hedging Facility: TBs can be used as a hedge against heavy interest rate fluctuations in the call
loan market. When the call rates are very high, money can be raised quickly against TBs and
invested in the call money market and vice versa. TBs can be used in ready forward transitions.
Defects of Trasury Bills:
 Poor Yield: The yield form TBs is the lowest. Long term Government securities fetch more interest
and hence subscriptions for TBs are on the decline in recent times.

9.  Absence Of Competitive Bids: Though TBs are sold through auction in order to ensure market
rates for the investors, in actual practice, competitive bids are competitive bids are conspicuously
absent. The RBI is compelled to accept these non-competitive bids. Hence adequate return is not
available. It makes TBs unpopular.
 Absence Of Active Trading: Generally, the investors hold TBs till maturity and they do not come
for circulation. Hence, active trading in TBs is adversely affected.
Call money
Call/Notice money is an amount borrowed or lent on demand for a very short
period. If the period is more than one day and upto 14 days it is called 'Notice
money' otherwise the amount is known as Call money'. Intervening holidays and/or
Sundays are excluded for this purpose. No collateral security is required to cover
these transactions
Features
o The call market enables the banks and institutions to even out their day-to-
day deficits and surpluses of money.
o Commercial banks, Co-operative Banks and primary dealers are allowed to
borrow and lend in this market for adjusting their cash reserve requirements.
o Specified All-India Financial Institutions, Mutual Funds and certain
specified entities are allowed to access Call/Notice money only as lenders.
o It is a completely inter-bank market hence non-bank entities are not allowed
access to this market.
o Interest rates in the call and notice money market are market determined.
T.Y.BFM MONEY MARKET6

10. y
In view of the short tenure of such transactions, both the borrowers and the lenders
are required to have current accounts with the Reserve Bank of India.
y
It serves as an outlet for deploying funds on short term basis to the lenders having
steady inflow of fund
Commercial paper is an unsecured, short-term loan issued by a corporation, typically for
financing accounts receivable and inventories. It is usually issued at a discount, reflecting current
market interest rates. Maturities on commercial paper are usually no longer than nine months,
with maturities of between one and two months being the average.
For the most part, commercial paper is a very safe investment because the financial situation of a
company can easily be predicted over a few months. Furthermore, typically only companies with
high credit ratings and credit worthiness issue commercial paper. Over the past 40 years, there
have only been a handful of cases where corporations have defaulted on their commercial paper
repayment.
Commercial paper is usually issued in denominations of $100,000 or more. Therefore, smaller
investors can only invest in commercial paper indirectly through money market funds.
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