YESHA

MUZAFFAR

SAURABH

INTRODUCTION & OBJECTIVES

Market lending & borrowing of short term funds. Objectives : 1. Various categories of money market instruments 2. Feature of each instruments 3. Know how each instrument is different from other.

Came first in 1917. Issued by central bank of the country. One of the safest market instrument.

PURCHASE PRICE

INTEREST INCOME

FACE VALUE

No TDS , Risk free Various maturity periods : 91 days 182 days 364 days Available for minimum-Rs. 25000 & its multiples.

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2. 3.

CALL MONEY: Very short term- 1 day Excluding Sundays & holidays Also called overnight money

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NOTICE MONEY: Short term- 1 to 14 days No requirement of collateral security

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2.

TERM MONEY: Beyond 14 days Inter bank market for deposits

Short term investment plans 30-180 days ( mostly 90 days ) Issued by non-financial firms Holder need not hold it till the maturity date.

Guaranteed by bank Involves collateral security Person needs to have a sound credit rating Generally used to finance imports & exports

Short term 3 months to 5 years Promissory note issued by bank Return in form of interest Return more as compared to savings bank account Issued for any denominations unlike T-bills

Transferable by endorsement Fixed period Rate determined by issuing bank Higher return and risk as compared to T-bills Can b issued to individuals, corporations, trusts, funds associations

COMMERCIAL PAPER
Low cost alternative to bank loans Issued at discounting value Short term -1 to 270 days Unsecured promissory note Yield high returns compared to treasury bills. Freely transferable in demat form

Between various corporations Unsecured loans High rates compared to banks Enables company to use surplus of the other company.

Involves predetermined rate and date Repo agreement to repurchase Reverse repo agreement to resell So called depending on the party who initiated it

Only by RBI approved parties & for RBI approved securities Allowed in all government securities including state government securities , public sector undertakings, private corporate securities Safe due to government backing Interest rate called repo rate

MONEY MATKET MUTUAL FUNDS

Introduced by RBI in 1992 Short term- 1 day to 1 year High rated due to pooled investments Objective- provide additional short term funds to individual investors Generally safest and secured of all mutual funds NAV remains constant but interest rate fluctuates

A well-diversified portfolio with a broad mix of investments will reduce credit risk, provide required liquidity, and maximize market opportunities.