Money Market Products

  1. Call/Notice Money: (0-2 days / 2-14 days). Banks are borrowers/lenders; LIC & Mutual funds only lenders (To manage immediate liquidity needs and meet statutory reserves)

  2. Treasury Bills (T-Bills): Govt products issued by RBI for deficits.

Short term instruments issued by Government of India to manage its immediate cash requirements. They are essentially valued notes that represent a formal agreement from the government.

Minimum value - 25000 Types: 91 days, 182 days, 364 days

Issued at discount to face value (e.g., 98 for 100). Highly liquid/tradable

Practically no risk

They are highly liquid and can be traded in the secondary market before they mature.

Yield Formula: `FV-DP/DP×364/D​×100

Commercial Paper (CP): Issued by big industrial houses (7-365 days) for working capital (WC). Requires rating from agencies (ICRA, CARE, CRISIL, etc.)

Minimum amount - 5,00,000

Bought at Discounted Value, redeemed at Face Value

Must get rating from credit agency like ICRA, CARE, CRISLL

No permission required from RBI

Long term: 7 - 365 days

  1. Certificate of Deposit (CD): Issued by scheduled comm-banks at discount. Less than 365 days (Short term funds). Transferable

  2. 1 Lakh denomination

  3. To meet short term fund issues.
  4. Issued at discount
  5. Less than 365 days

◦ Note: CD is transferable (bearer), whereas FD (Fixed Deposit) is non-transferable

Certificate of Deposit Fixed Deposit
Issued by commercial banks Created at bank
Denomination fixed Denomination not fixed
Duration fixed Duration not fixed
Interest not specified Interest specified
Transferrable Non-transferrable

  1. Commercial Bills: "Bill discounting" where banks provide discounted money to industries on bills

  2. COLL: Collateral based borrowing or lending (CBLO)