Financial market that fills the demand-supply gap in short-term funds with maturity period less than 1 year.
- Commercial Paper: Unsecured debt Instrument that enables Corporates to raise short-term borrowings for a period less than 1 year.
- Certificate of Deposit: Issued by Banks and Financial Institutions to raise short-term capital. Like Fixed Deposit, but of shorter maturity period. Further, the minimum value of Certificate of Deposit is Rs 1 lakh.
- Call/Notice Money: Instruments used for Inter-bank borrowing and Lending. Under call money market, funds are transacted on an overnight basis and under notice money market, funds are transacted for a period between 2 days and 14 days.
- Treasury Bills: Instruments that government use to raise short-term money from the financial market. (For long-term: government bonds); Maturity period: 91-days, 182-day, 364-day. T-bills are ‘zero-coupon securities’ i.e., no interest. Instead, they are issued at a discount rate and redeemed at the face value on maturity. T-bills are issued only by Central government.
- Cash management bills: Short-term instruments like T-bills. Issued by the government to meet temporary cash flow mismatches. Maturity period: less than 90 days. (More than 90 days – T-Bills). Issued at a discount and redeemed at face value on maturity. Eligible under SLR requirements.
- Repo: Used by the Banks to borrow short term loans from the RBI.
- Ways and Means Advances (WMA): Borrowing by the Government from the RBI to meet temporary cash flow mismatches.
- Maturity period: 90 days.
- Interest rate: Repo rate.