MONEY MARKET AND
CAPITAL MARKET
Money Market

Money market is the market for lending and
borrowing of short term funds.

It deals with the financial assets having a
maturity period less than 1 year.

It deals with only those assets which can be
converted into cash readily and with minimum
transaction cost.
Money Market Instruments

Call money Market

Treasury Bills

Certificates of Deposit

Commercial Papers

Repo Instruments
Call money Market
Market for extremely short period loans1 day to 14 days.
 Loans are repayable at demand at the
option of either the lender or the
borrower.

Commercial Papers
Issuers: All Pvt sector companies, Public
sector units and non banking companies.
 Investors: Individuals, Banks, Corporates,
NRI’s
 Features:

◦ Instrument comprising promissory note with
fixed maturity.
◦ Issued at a discount to face value basis but
can also be issued in interest bearing form.
◦ No pledging of asset.
◦ Can be issued directly by the company or
through banks
Treasury Bills
Issued to the public and other financial
institutions for meeting the short term
financial requirements of the central
government.
 On the basis of periodicity, TB’s can be
classified into
◦ 91 Days TB’s (issued at a fixed discount of 4%)
◦ 182 Days TB’s
◦ 364 Days TB’s (do not carry any fixed rate. The
discount rate is quoted in the auction by the
participants and accepted by the authorities)
Certificates of Deposit
Issuers: Commercial Banks, Financial
Institutions.
 Subscribers: Individuals, Corporations,
Trusts, associations and NRI’s
 Features:

◦ Freely negotiable
◦ Issued at discount to face value.
◦ Repayable at fixed date.
Capital
Market
Primary
Market
Secondary
Market
Primary Market
Also known as new issue market
 The services of Primary market are
entirely taken up by banks, brokers and
underwriters
 It deals with the new securities which are
issued for the first time for the public
subscription.
 It is also a Platform for expansion,
diversification and modernization of
existing units.

Functions

Origination

Underwriter

Distribution