Money Market and Capital Market Flashcards
Money Market
Money market: Funds for less than 364 days
Also known as working capital markets
Capital Markets
Capital Markets: Funds for more than a year
Chakravarthy Committee
Underlined the importance of money market for the first time
Vahul Committee
Lais the blue print for the development of the money market
Call Money
Call money is for a very short period.
Issued by: Banks, DFHI, STCI, LIC, UTI, NABARD
Borrowers: DFHI STCI
Remarks: No collateral
Market determined interest rates
AKA money at call, overnight borrowings
Notice Money
Duration is more than one day to up to 14 days
Issued by: Banks, DFHI, STCI, LIC, UTI, NABARD
Borrowers: DFHI STCI
Remarks: No collateral
Market determined interest rates
Treasury Bills
TB are of three types: 91 D, 182D, 364 D
Issued by: Central govt, NOT state govt
Borrowers: Primary Dealers such as FI, banks etc.
Auction is held on Negotiated Dealing System
Remarks: Issued at discounted price and redeemed at face value
Zero coupon rate
RBI acts as an agent of Govt and manages through Public Debt office
T-bills are also issued under Market Stablization Scheme
Minimum amount: 25000 and then 25000X
Cash Management Bills
CMBs are issued for less then 91 days
(Same as T-Bills)
Issued by: Central govt, NOT state govt
Borrowers: Primary Dealers such as FI, banks etc.
Auction is held on Negotiated Dealing System
Remarks: Issued at discounted price and redeemed at face value
Zero coupon rate
Not a part of WMA
Interbank term money
Inter bank market for deposit of maturity beyond 14 days to 3 months
Issued by: Interbank market
Borrowed by: Interank market
Certificate of Deposit
CD is negotiable promissory note and is secure
Issued by Banks for 14 Days to 1 Year
issued by FI for 1 year to 3 years
Issued by banks and FI.
RRB and Local Area banks CAN NOT issue
Borrowes: Individuals and Companies etc
Remarks: issued at discounted price and redeemed at face value, Discount rate is negotated between buyer and lender
Zero Coupon rate
Minimum amount: 1 Lacs and then multiples of 1 Lacs
Intercorporate Deposit Market
Issued by: Corporate
Borrowers: Corporate
Remarks: Unsecured loan
Commericial Papers
Commerical papers are short term unsecured promissory notes
Period: 7 days to 1 year
Issued by: Corporates (net worth > 4 crore), Primary Dealers (PD), Satellite Dealers (SD), Financial institutions(FI)
Borrowers: Public
Remarks: Credit Rating is needed
Issued at discount to face value
Minimun amount: 5 lacs and then multiples of 5 lacs
Ready forward contracts
Repo Issued by: RBI and banks
Borrowers: SCB and RBI
Remarks: Liquidity Adjustment Facility
Commercial Bills
Trade bills when disounted by commercial banks are called Commercial Bills
Issued by: AIFI, NBFC, SCB, Cooperative anks, Mutual Finds
Borrowers: Commercial banks
Remarks: Discounting receipts
Discount and Finance House of India (DFHI)
Aim: To provide liquidity to money market
Set up by RBI+PSB + LIC, GIC, UTI
RBI transferred its holding to SBI, now called SBI DFHI
