SEMINAR

ON
MONETARY MANAGEMENT
Money market instruments in India
Presented by
L.Lavanya MBA(banking and insurance)

MONEY MARKET INSTRUMENTS IN INDIA

Money market:

Money means currency (or) cash, the term money has a

wider interpretation in monetary management.
Every country have a money market which has no
physical existence.(i.e.) it cannot be desiganized by the location.
No physical presence
It is a market for near money asset, it is an virtual
market
what are near asset:
All those assets which can be easily converted in to cash
Near asset is an financial asset term debt instruments.

There are 4(or) 5 types of short term instrument

trade bill

promisary note

treasury bill

commercial paper

certificates of deposited
These are called as popular money market
instrument
It is a market for borrowing and lending of short
term money
money market instrument:
every country have

money market

capital market
Money market commercial bankers are dominant
player

Trade bill:

A trade bill of is arise out of genuine trade transaction

A trade bill arises from credit sale(or) credit purchases
It is an order given by a credit to the debit for
repaying the debt after a specified date
for example: x sells good to y for rs.50,000 on credit for
three months. This transaction it need some documentary
evidence. the document is called as trade bill.
The document is placed before debtor and he should
sign on the document as accepted.
All money market instrument are negotiable
instrument all m.m.i is brought and sold.
on Feb. 1 if x in need of money he can discount his
bill in the bank.
Trade bill can brought and sold in the money market

Promisary note:

it arise out of financial transaction. acknowledgement

of debt issued by the debtor to the credit (or) it is a promise
given by the debtor.
trade bill prepared by creditor
promisary bill prepared by debtor
promisary note contains the promise given by the
debtor to the creditor
we can discount the promisary note
it is an traditional instrument
promisary note did not have any acceptance

Treasury bill:

the world treasury

Short term security issued by the government in the money
market
Short dated government securities
It can be issued for any duration it is an AOD issued by the
government
It can be issued in different dimonination high value
instrument. either in lakhs (or) millions
they can be issued for any maturity
example:
7days
14days
30days
60days
360days

Treasury bill
it is decided by the government according to their requirement
They always issued at discount at face value (I.e.) interest is hiden
Issue price: example

facevalue-10000
Issue price-9000
Maturity value- 10000
(i.e.) 1000-intrest
Treasury bill can bought and sold in the money market
when the investor in need of money he can sell the money in

bank

In our country treasury bill is very very active

Commercial papers:
Commercial paper are short term debt securities issued by
reputed
companies in order to meet their working capital needs
Every enterprise need fixed capital and working capital
Till 1990s commercial bank are the loan provided for the
company to full fill the working capital
It period is 3months-1year
It can be issued only to the reputed company
A company which is enjoying a good credit tarting can go for
commercial bank
it will be in the form of usance promisary note and they will
also issued at
discount to the face value
Commercial paper are also high value instrument and mothy
delt with instutional investor

Certificate of deposit:
certificate of deposit is an short term security issued by the
commercial bank
They are issued for maturity period of one year
They are high value instrument
They are only in laksh of rupees not in thousand
They are also issued at the face value
Commercial banks are issued by the government. the
certificate of deposits issued by the commercial bank

THANK YOU