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Presented by:
14P087
Mohana Kodipaka
14P088
Mukul Panchineni
14P091
Nidhi Kumar
14P102
Sameer Jain
14P105
Jaideep Sarnaik
14P110
Srijan Bhatnagar
A market for short term financial assets 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 the lending and
borrowing of short term funds (less than one year)
Asegment of the financialmarket in which financial instruments with high
liquidity and very short maturities are traded
It doesnt 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
Money market investments are also called cash investments because of
their short maturities
It deals with financial assets having a maturity period less than one year
only
Money markets lack a central trading floor orexchange and deals are
transacted over the phone or through electronic systems
Money Market Instruments provide the tools by which one can operate
in the money market. Money market instrument meets short term
requirements of the borrowers and provides liquidity to the lenders. The
most common money market instruments are
1. Treasury Bills
2. Certificate of Deposits,
3. Commercial Papers,
4. Repurchase Agreements and
5. Banker's Acceptance
Treasury Bills
Treasury Bills are one of the safest money market instruments as they are
issued by Central Government
T-bills are purchased for a price that is less than theirpar (face) value;
when they mature, the government pays the holder the full par value.
Effectively, your interest is the difference between the purchase price of
the security and what you get at maturity
The buy value of the T-Bill is determined by the bidding process through
auctions. At present, the Government of India issues two types of treasury
bills through auctions, namely, 91-day, and 364-day
The maturity period of CDs issued by banks should not be less than 7 days and not more than
one year, from the date of issue. The FIs can issue CDs for a period not less than 1 year and
not exceeding 3 years from the date of issue.
The amount of interest you earn depends on a number of other factors such as the current
interest rate environment, how much money you invest, the length of time and the particular
bank you choose
main disadvantages of CDs are the returns are paltry compared to many other investments
and your money is tied up for the length of the CD and you won't be able to get it out without
paying a harsh penalty
Issued by (i) scheduled commercial banks {excluding Regional Rural Banks and Local Area
Banks}; and (ii) select All-India Financial Institutions (FIs) that have been permitted by RBI to
raise short-term resources within the umbrella limit fixed by RBI.
Minimum amount of a CD should be Rs.1 lakh, i.e., the minimum deposit that could be
accepted from a single subscriber should not be less than Rs.1 lakh, and in multiples of Rs. 1
lakh thereafter.
Commercial Paper is the short term unsecured promissory note issued by corporate
and financial institutions at a discounted value on face value
The minimum credit rating shall be A-2[As per rating symbol and definition
prescribed by Securities and Exchange Board of India (SEBI)].
For the most part, commercial paper is a very safe investment because the
financial situation of a company can easily be predicted over a few months.
Furthermore, typically only companies with highcredit ratingsand credit worthiness
issue commercial paper
Repurchase Agreements
Banker's Acceptance
It's like a bill of exchange stating a buyer's promise to pay to the seller a
certain specified amount at a certain date. And, the bank guarantees
that the buyer will pay the seller at a future date. Firm with strong credit
rating can draw such bill
These securities come with the maturities between 30 and 180 days and
the most common term for these instruments is 90 days
Thank you