Money Market Instruments:
1. Treasury Bill:
They are issued by the RBI on behalf of the Central Government to meet its short term requirement of funds.
They are issued at a discount on the face value of the instruments and repayable at par. They are issued in the form of promissory notes. They are also known as Zero Coupon Bonds as no interest is paid on such bills. They are highly liquid. The maturity period of these bills may be between 14 to 364 days.
2. Commercial Paper:
Commercial paper is a short term unsecured promissory note, negotiable and transferable by endorsement and delivery with a maturity period of 15 days to one year. It is sold at a discount and redeemed at par.
3. Call Money:
Call money is short term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter bank transactions.
4. Certificate of Deposit:
Certificates of Deposit (CDs) are short-term instruments issued by Commercial Banks and Special Financial Institutions (SFIs), which are freely transferable from one party to another. The maturity period of CDs ranges from 91 days to one year.
5. Commercial Bill:
A commercial bill is a Bill of Exchange used to finance the working capital requirements of business firms. When goods are sold in credit, the seller draws the bill and the buyer accepts it. The seller can discount the bill before its maturity with the bank. When a trade bill is accepted by a commercial bank it is known as commercial bills.
