Financial Markets
Financial Market in India primarily consists of –
a) money market
b) Debt Market
C) Forex Market
D) Capital Market
Money Market Meetings short term requirement of the borrower and also provide liquidity or cash to the lenders.
Major Players in the Indian money market instruments is-
- Reserve Bank of India (RBI)
- SBI DFHI Limited (Amalgamation of Discount & Finance House of India and SBI Sows to farrow in 2004)
- Commercial Banks, Co-operative Banks and Primary Dealers are allowed to borrow and lend.
- Specified All-India Financial Institutions, Mutual Funds, and certain specified entities are allowed to access the Call / Notice money market only as lenders
- Individuals, firms, companies, corporate bodies, trusts and institutions can buy Treasury bills, CPS and CDs.
Some of the leading products Money market is-
1) Evidence of Deposits
2) Commercial Paper
3) Tresury Bills
4) Exchanger
5) money market mutual fund
6) Promissory notes
Certificate of Deposit
- CDs are negotiable money market instrument issued in demat form or as a Usance debt securities.
- CDs issued by banks should not have the maturity of less than seven days and not more than a year. Financial institutions are allowed to to issue CDs for a period of between 1 year and up to 3 years.
- CDs are like bank deposits, but unlike traditional time deposits these are freely transferable and are often referred to as negotiable certificates of deposit.
- CDs usually offer higher returns than bank term deposit.
- CDs are rated by approved rating agencies (eg CARE, ICRA, CRISIL and Fitch) which greatly increase their marketability in the secondary market, depending on demand. SBI DFHI is an active player in the secondary market of CDs.
Features of CD - All scheduled banks (excluding RRBs and Co-operative banks) are entitled to issue CDs.
- They may be issued to individuals, corporations, trusts, foundations and associations.
- NRIs can also subscribe to CDs, but on non-repatriated basis alone. In the secondary market such CDs can not be approved for another NRI.
- They are issued at a discount freely determined by the issuer and the market / investors.
- CDs issued in physical form are freely transferable by endorsement and delivery. Procedure for transfer of dematted CDs resemble any other demat securities.
- For CDs are no lock-in period
- CDs are issued in denominations of Rs.1 Lac and in multiples of Rs. 1 Lac thereafter.
- Discount / Coupon rate of CD is determined by the issuing bank / FI
- Loans can not be granted against CDs and Banks / FIs can not buy back their own CDs before maturity
- SBI DFHI Limited, participates in both the primary and secondary market for CDs.
- Investors can buy CDs through SBI DFHI Invest Plus scheme of SBI DFHI Ltd.
About the Author
Gajanan Bochare is a Production Engineer and Management Graduate. He is currently working as a Management Consultant with Mott MacDonald in India and based at Hyderabad. He is associated with various management institutes as a Guest lecturer & has keen interest in research for Industry.
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