Comparison between Money Market Instruments

BASIS TREASURY BILLS COMMERCIAL BILL MARKET CERTIFICATE OF DEPOSIT COMMERCIAL PAPER CALL MONEY MARKET GILT-EDGED SECURITIES MARKET
INTRODUCTION Treasury bills are short-term securities issued by RBI on behalf of Government of India. They are the main instruments of short-term borrowing by the Government. T-Bills are issued on discount to face value, while the holder gets the face value on maturity. It is a market which deals in commercial bills or trade bills. It also includes discounting of the trade bills. Certificate of Deposit is like a promissory note issued by a bank in form of a certificate entitling the bearer to receive interest. It is similar to bank term deposit account. Commercial papers are usually known as promissory notes which are unsecured and are generally issued by companies and financial institutions, at a discounted rate from their face value. Call money market is a market wherein surplus funds (mostly of banks) are traded. Banks lend and borrow money for a short duration from this market The gilt-edged market refers to the market for Government and semi-government securities, backed by the Reserve Bank of India (RBI).
MATURITY PERIOD The maturity period varies from one treasury bill to another:

14 days T-bill

91 days T-bill

182 days T-bill

364 days T-bill

Maximum tenure: 90 days 7 days to 1 year 7 days to a maximum of up to 1 year. 1 day to 14 days Maximum tenure is a tenure of less than 1 year.

 

 

 

 

ISSUERS Issued by the RBI on behalf of the government. It is drawn by seller on the buyer of goods taken on credit Scheduled commercial banks {excluding Regional Rural Banks and Local Area Banks} and select All-India Financial Institutions (FIs) Companies

Primary dealers

Financial institutions

Some eligible companies

Scheduled commercial banks (excluding RRBs), co-operative banks (other than Land Development Banks) and Primary Dealers (PDs) act as both borrowers and lenders. issued by Governments such as Central and State Governments, Semi-Government Authorities, Municipalities etc.
ELIGIBILITY TO INVEST IN THE INSTRUMENT Individuals, Firms, Trusts, Institutions and banks can invest in T-Bills. Individuals, corporations, companies (including banks and PDs), trusts, funds, associations, etc.

Non-Resident Indians (NRIs) may also subscribe to CDs, but only on non-repatriable basis.

Individuals, banks, other corporate bodies (registered or incorporated in India) and unincorporated bodies, Non-Resident Indians and Foreign Institutional Investors (FIIs) shall be eligible to invest in CP Scheduled commercial banks (excluding RRBs), co-operative banks (other than Land Development Banks) and Primary Dealers (PDs) Banks, primary dealers, insurance companies, mutual funds, foreign portfolio investors and high net worth individuals.
TRANSFERABILITY They are transferable. They are transferable through endorsement. CDs are freely transferable. Commercial paper is transferable through endorsement or delivery. The maturity tenure is very low so no need of transferability arises. Can be transferred through endorsement.
DEMINATION OF THE INSTRUMENTS Minimum-Rs.25000 and multiples of Rs.25000 and thereafter It depends on the credit purchase of the buyer. Minimum-Rs.100000 and multiples of Rs.100000 and thereafter Can be issued in denominations of Rs.5 lakhs or multiples of Rs.100000 thereafter. It depends on the requirement of the borrower. Central government securities: Min. denomination is Rs.10000 and trading takes place in multiples of Rs.5 crores.

State government securities: Min. denomination is Rs.1000 and trading takes place in multiples of Rs.1.5 crores.

 

Rakshit Nair

Rakshit Nair

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About Me

I’m a Commerce Graduate & CFP Professional, engaged in blogging since 3 years. I’m not affiliated with any financial product. The purpose of writing blog is to spread financial awareness and help people in achieving excellence for money. Please note that the views expressed on this Blog/Comments are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment advice or legal opinion.

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