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Give the meaning of the following money market instruments: (i) Treasury Bill and (ii) Call Money. |
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Answer» Money Market is a market for short-term funds which deals in monetary assets whose period of maturity is upto one year. Following are the money market instruments: (i) Treasury Bills: Treasury bills (T-Bills) are issued by the Reserve Bank of India on behalf of the government of India as a short-term liability, and sold to the banks and to the public. The issue period ranges from 14 to 364 days. T-Bills are negotiable instruments, i.e., they are freely transferable. They are issued at a discount and redeemable at par. (ii) 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. It is primarily used by Commercial Banks to maintain a minimum cash balance known as cash reserve ratio (CRR) as stipulated by the RBI. |
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