Money Market
Banking · मुद्रा बाजार
📋Quick Overview
The money market is the market for short-term borrowing and lending (up to 1 year). It deals in highly liquid, low-risk instruments. The key instruments are: Treasury Bills (T-Bills, issued by RBI on behalf of Government, 91/182/364 days), Commercial Paper (CP, issued by companies, 7 days to 1 year), Certificate of Deposit (CD, issued by banks, 7 days to 1 year), Call Money (overnight lending between banks, 1 day), and Repo (short-term borrowing against govt securities). The money market is regulated by RBI, while the capital market (long-term, stocks/bonds) is regulated by SEBI.
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Money Market = short-term (up to 1 year) | Regulated by RBI | T-Bills: 91/182/364 days | Capital Market = long-term | Regulated by SEBI
📖Money Market Instruments
| Instrument | Issued By | Tenure | Key Feature |
|---|---|---|---|
| Treasury Bills (T-Bills) | RBI on behalf of Government of India | 91 days, 182 days, 364 days | Zero coupon (no interest), issued at discount, redeemed at face value. Govt's short-term borrowing. |
| Commercial Paper (CP) | Companies/Corporates | 7 days to 1 year | Unsecured promissory note. Only high-rated companies can issue. Min ₹5 lakh. |
| Certificate of Deposit (CD) | Banks and Financial Institutions | Banks: 7 days-1 year; FIs: 1-3 years | Negotiable, transferable term deposit. Min ₹1 lakh. |
| Call Money | Banks to banks | 1 day (overnight) | Interbank lending for 1 day. Rate = call rate. No collateral needed. |
| Notice Money | Banks to banks | 2-14 days | Same as call money but for 2 to 14 days |
| Term Money | Banks to banks | 15 days - 1 year | Interbank lending for 15 days to 1 year |
| Repo | Banks with RBI | Overnight/short-term | Bank sells govt securities to RBI and repurchases. Rate = repo rate. |
📝Treasury Bills — Details
- •T-Bills are issued by RBI on behalf of Government of India
- •Three types: 91-day, 182-day, and 364-day T-Bills
- •Zero coupon bonds — issued at a DISCOUNT and redeemed at face value (par)
- •No risk of default — backed by Government (risk-free instrument)
- •Minimum amount: ₹25,000 and multiples thereof
- •Sold through auctions conducted by RBI
- •T-Bill yield is the benchmark for short-term interest rates