Major Players in Money Market

Money Market is regulated by R.B.I in India and instrument having maturity less than one year usually traded in money markets

Major Players in Money Market

1. RBI

2. Central Government

3. State Governments

4. Banks

5. Financial Institutions

6. Micro Finance Institutions

7. Foreign Institutional Investors (FII)

8. Mutual Funds

Money Market Instruments

1. Treasury Bills

2. Commercial Papers

3. Certificate of Deposit

4. Bankers Acceptance

5. Repurchase Agreement

1. Treasury Bills

Treasury Bills are also know as T-Bills. This is one of safest instrument to invest .Tbills are issued by RBI backed by government security. RBI issue treasury bills on the behalf of central government to meet the short term liquidity needs of central

government bills are issued at a discount to face value, on maturity face value is paid to holder.

At present, the Government of India issues three types of treasury bills through auctions, for 91-day, 182-day and 364-day. Treasury bills are available for a minimum amount of Rs.25,000 and in multiples of Rs.25,000.

Treasury bills are also issued under the Market Stabilization Scheme (MSS).In this if RBI want to absorb excess liquidity it can issue T-bills .

2. Commercial Papers (CP)

Commercial papers are issue by private organizations or financial institutions having strong credit rating to meet short term liquidity requirements. These are unsecured instruments as these are not backed by any security. The return on commercial papers is usually higher than T-bills. Different rating agencies ,rate the commercial paper before issue by any organization .If commercial paper carrying good rating means it is safe to invest and carrying lower risk of default .

All corporate are not eligible to issue CP, only who met certain defined criteria by RBI are eligible to issue CP.

CP can be issued for maturities between a minimum of 7 days and a maximum of up to one year from the date of issue and can be issued not less than 5 lakhs and multiples thereafter.