1 Presented By: SUPRIYA M.COM 1st Year ROLL NO-3033

2  INTRODUCTION  INSTRUMENTS OF MONEY MARKET A. OLD INSTRUMENTS B. NEW INSTRUMENTS  LATEST INSTRUMENTS  NEED OF INSTRUMENTS  MAJOR PARTICIPANT OF INSTRUMENTS  CONCLUSION  REFERENCES

3  As per RBI definitions," A market for short term financial asset that are close substitute for money, facilitates the exchange of money in primary and secondary market”  The money market is a mechanism that deals with lending and borrowing of short term funds (less than one year).  A It does not actually deal in cash or money but deals with substitute of cash like trade bills, promissory notes,& government papers which can converted into cash without any loss at low transaction cost.

4 Investment in money market is done through MONEY MARKET INSTRUMENT.These instrument meets short term requirement of the borrowers and liquidity to the lender. Types of instrument are following, TYPES OF INSTRUMENT A.OLD INSTRUMENTB.NEW INSTRUMENT

5. TYPES TREASURY BILLS MONEY AT CALL AND SHORT NOTICE COMMERCIAL BILLS

6  T-Bills are most marketable money market security  They are issued with three-months, six-months and for a year. T-Bills are purchased for a price that is less than their face value; when they mature, the government pays the holder the full par value.  T-Bills are so popular among money instruments because of affordability of the individual investors

7 SUPPOSE AN INVESTOR PUCHASES A 91-DAYS TREASURY BILL WITH A FACE VALUE OF RS.100,000 FOR RS.96000,BY HOLDING THE BILL UNTILL THE MATURITY DATE,THE INVESTOR RECEIVE RS.100,000. THE DIFFIRENCE OF RS.4000 BETWEEN THE PROCEEDS RECEIVE AT MATURITY AND THE THE AMT PAID AT THE TIME OF PUCHASING BILL IS REPRESENTS TH INTERSET RECEIVED BY HIM. MEANS: – 96000= 4000 AMT OF INTERSET SBI DFHI Ltd, is an active player in the both the primary and the secondary market for Treasury Bills with an impressive total out right turnover of Rs.10,176 crores.

8 ISSUE OF TREASURY BILLS T-Bills are issue through bidding process at auction. The bid can be prepared either competitively and non-competitively. In the second type of bidding, return required is not specified and the one determined at the auction is received on maturity. Where as in case of competitive bidding the return required on maturity is specified in the bid. In case the return specified is too high then the T-bill might not be issued to the bidder. 91-day. Its auction is weekly on every Wednesday. 182-day. Its auction is on every alternate Wednesday other than a reporting week. 364-Day. Its auction is on every alternate Wednesday in a reporting week.

9  This is the amount lent to bill brokers, stock brokers and to other banks for very short periods.  Such loans are repayable on demand or at short notice-generally at less than 24 hours notice.  This is a liquid asset because it can be quickly turned into cash without loss but it yields a relatively small amounts,just about 1\2 percent.

10  Commercial bill is known as BILL OF EXCHANGE.  It is a written instrument containing a unconditional order.  The bill is signed by the drawer,directing a certain person to pay a certain sum of money only to, or order of a certain person, or to the bearer of the instrument at a fixed time in future or on demand.  MATRURITY PERIOD IS 90 DAYS.

11 TRANSACTION THROUGH BILL OF EXCHANGE

12 TYPES OF COMMERCIAL BILLS  INLAND BILL  FOREIGN BILL  TIME BILL  DEMAND BILL  TRADE BILL  DOCUMENTRAY BILL  CLEAN BILL

13 INTER CORPO- RATE DEPOSITS TYPES REPUCHASE AGREEMENT MONEY MARKET MUTUAL FUND BANKER’S ACCEPTANCE COMMERCIAL PAPER CERTIFICATE OF DEPOSITS

14 .A CD is a time deposit within a bank.  Like most time deposit, funds cannot drawn before maturity without paying a penalty.  CDs have specific maturity date,intreset rate and it can be issued in any denomination.  The main advantage of CD is their safety.  Anyone can earn more than saving interest.  MATURITY PERIOD IS 90 TO364 DAYS.

15  REPO are transactions in which two parties are agree to sell and repurchase the same security.  They are usually very short term repurchase agreement from overnight to 30 days more.  The short term maturity and government backing usually mean that Repos provide lenders with extreamly low risk.  REPOS are safe collateral for loan.

16 REPUCHASE AGREEMENT BETWEEN BANK A & BANK B

17 REPO & REVERSE REPO REPO rate is the rate at which the RBI lends shot-term money to the banks. When the repo rate increases borrowing from RBI becomes more expensive. Therefore, we can say that in case, RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate. (6.50) Reverse Repo rate is the rate at which banks park their short-term excess liquidity with the RBI. The RBI uses this tool when it feels there is too much money floating in the banking system. An increase in the reverse repo rate means that the RBI will borrow money from the banks at a higher rate of interest. As a result, banks would prefer to keep their money with the RBI (5.50)

18  A Banker’s acceptance is a short term credit instrument created by a non-financial firm.  This are guaranteed by a bank to make payment.  Acceptance are treated as discount from face value in the secondary market.  BA acts as a negotiable time draft for financing imports, exports or other transaction in goods.  This is especially useful when the credit worthiness of a foreign trade partner is unknown.

19..  It is a short term unsecured loan issued by a co- operation typically financing day to day operation.  it is a safe investment because the financial situation of a company can easily be predicted over a few months.  only company with high credit rating issued CPs.  Commercial papers are actively traded in the secondary market since they are issued in the form of promissory notes and are freely transferable in demat form.

20 TYPES OF COMMERCIAL PAPERS  DIRECT PAPERS: These papers are issued directed by company to investors without any intermediary.  DEALERS PAPERS:These papers issued by a dealer or merchant banker on behalf of a client

21  ICD’s is a popular short term investment alternative for Indian companies.  A cash surplus company will deposits its funds in a associate company.  There are three types of ICDs – 3 months,6 months qand call deposits

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23 TYPES OF MONEY MARKET MUTUAL FUND  Institutional Money Market Mutual Funds: These funds are held by governments, institutional investors and businesses etc. Huge sum of money is parked in institutional money funds.  Retail Money Market Mutual Funds: Retail money market funds are used for parking money temporarily. The investment portfolio of money market funds comprises of treasury bills, short term debts, tax free bonds etc.

24  ZERO COUPON BONDS  FLOATING RATES BONDS  PARTLY PAID STOCK  CAPITAL INDEX BONDS  TAP STOCK

25  Need for short term funds by bank  Outlet for deploying funds on short term basis.  Need to maintain the SLR prescribed by the RBI.  Need to maintain the CRR prescribed by the RBI.  Helps banks to invest surplus cash.  To meet the sudden demand of funds in any situation.  Efficient allocation of credit and stability in foreign exchange market

26  RESERVE BANK OF INDIA  COMMERCIAL BANK  NON BANKING FINANCE COMPANIES  STATE GOVERNMENT  LARGE CORPORATE HOUSES

27 The money market us a vibrant market, affecting our everyday lives. As the short term market for money, money changes in hand in a short time frame and players in the market have alert to be changes, up to date with news and innovative with strategies and products.

28  Financial Institutions and Markets By.Shashi k. gupta Nisha Aggarwal Neeti Gupta   

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