FINANCIAL MANAGEMENT TUTORIAL PRESENTATION

Discount and Finance House

of India (DFHI)
Submitted by:
1. Saurabh Sharma (15109012)
2. Keshav Unmath (15109013)
3. Abhishek Mittal (15109019)
INTRODUCTION
• The Discount and Finance House of India (DFHI) was set up in April
1988 to impart liquidity in the money market. It was set up jointly by
the RBI, Public sector Banks and Financial Institutions.
Objective
• To understand the need for estabilishing DFHI
• To understand role and function of DFHI
• To know various instruments traded on DFHI
Content List
• History of DFHI
• Objectives of DFHI
• Money Market instruments of DFHI
• SBI DFHI
• Roles of DFHI
History of DFHI
DFHI was incorporated on March 8,1988 under Companies Act, 1956
with an authorized share capital of Rs.100 crore subscribed by the RBI
(Rs.51 crore), Public Sector Banks (Rs.33 crore) and All Indian Financial
Institutions (Rs.16 crore).
Objectives of DFHI
• To even out the liquidity imbalances in the banking system i.e. to balance
the demand with the supply for short term finance in the money market.
• To promote secondary market in short term money market instruments i.e.
to be an active trader in money market instruments rather than a mere
repository, and thereby, impart improved liquidity to short term money
market instruments.
• To integrate markets at regional centers with the main market at Mumbai,
through its network.
• Provide safe and risk-free short-term investment avenues to institutions;
DFHI being an institution promoted by the public sector banks/financial
institutions and RBI, enjoys excellent credit rating in the market.
Objectives
• Provide greater liquidity to money market instruments.
• Facilitate money market transactions for small and medium sized
institutions who are not regular participants in the market.
• DFHI provides the 'Constituent SGL' Account facility which enables
even those entities which otherwise do not have an SGL Account
facility with the RBI to reap the full benefits of investing in
government securities.
About DFHI
• DFHI mobilises funds/resources from commercial/cooperative banks,
financial institutions and corporate entities having lendable resources
(which individually may not represent tradable volumes in wholesale
market) which are pooled and lent in the money market.
• DFHI serve as a base, to broaden the secondary market and give an
assured liquidity to the instruments which is a pre-requisite for a
developed money market.
• DFHI with its large customer base and reach has provided higher
liquidity to the borrowing institutions at market related rates as also
helped the small banks, institutions and corporate entities to secure
competitive price for their surplus resources.
Money Market Instruments in which DFHI
deals
• DFHI deals in the following instruments/products:
• Treasury Bills
• Dated Government Securities
• Certificates of Deposit
• Commercial Papers
• Call (overnight) Money
• Notice Money
• Term Money
• Derivative Usance Promissory Notes of Commercial Banks
• Interest Rate Swaps/Forward Rate Agreements
Investment opportunity to PSUs and
Corporates in Call Money
Public Sector Organization (PSUs) and Corporates are allowed to lend
their surplus resources through DFHI in money market, subject to
approval of RBI. The minimum size of transaction as stipulated by RBI at
present is Rs.3 crore.
SBI DFHI
Company Overview
SBI DFHI LTD is a State Bank of India Group Company that is
engaged in the domestic Money and Debt Markets. The company
is the result of the merged RBI promoted Discount & Finance
House of India (DFHI) and SBI Gilts Ltd, a subsidiary of an Indian
commercial bank.SBI DFHI trades in Fixed Income Securities
(Treasury Bills, Government securities, State Development Loans,
Non SLR Bonds, Corporate Bonds) and Short Term Money Market
instruments (Certificates of Deposit, Commercial Paper, Inter-
Corporate Deposits, Call & Notice Money Deposits). The company
is active in retailing of Government Securities, including small lots,
and are the distributors of Mutual Fund products of all leading
funds. The company started in the year 1988 and is based in
Mumbai.
NAICS Industry Classification
• Main Activities:
Securities, Commodity Contracts, and Other
Financial Investments and Related
Activities | Funds, Trusts, and Other
Financial Vehicles
ROLE OF DISCOUNT AND FINANCE
HOUSE OF INDIA (DFHI)
The main objective of this money market institution is
to facilitate smoothening of the short-term liquidity
imbalances by developing an active secondary market
for the money market instruments. Its authorized
capital is Rs. 250 crores.
• DFHI participates in transactions in all the market segments, it
borrows and lends in the call, notice and term money market,
purchases and sells treasury bills sold at auctions, commercial
bills, CDs and CPs. DFHI quotes its daily bid (buying) and offer
(selling) rates for money market instruments to develop an
active secondary market for all these.

• To provide brokerage services for the inter-bank call money

market.

• To undertake short-term buy-back arrangements in government

and other approved dated securities to impart short-term
liquidity to these securities.
• Treasury bills are not bought back by the RBI before
maturity. Similarly, except at the fortnightly auctions
these cannot be purchased from the RBI. DFHI fills this
gap by buying and selling these bills in the secondary
market. The presence of DFHI in the secondary market
has facilitated corporate entities and other bodies to
invest their short-term surpluses and to en cash them
when necessary.

• Facilitate money market transactions of small and

medium types of institutions that are not regular
participants in the market.
• The RBI extends reliance limit to the DFHI against the
collateral of treasury bills and against the holdings of
bills of exchange with a view to imparting liquidity to
various money market instruments.

• To promote secondary market in short term money

market instruments i. e. to be an active trader in the
money market instruments rather than a mere
repository, and thereby impart improved liquidity to
short term money market instruments.
• The easy conditions prevailing in the call money
market discouraged secondary market transactions
in the treasury bills. Both the 91 days and 364 days
treasury bills are becoming preferred instruments
in the money market.