DMPQ- . “ A large numbers of public and private lenders are participants in Indian money market.” Elucidate.

Theoretically any one can participate in the market. Yet market practices and regulatory pronouncements have placed certain restrictions on participation for each of the sub-markets in the money market.

Central Government

The Central Government is an issuer of Government of India Securities (G-Secs) and Treasury Bills (T-bills). These instruments are issued to finance the government as well as for managing the Government’s cash flow. G-Secs are dated (dated securities are those which have specific maturity and coupon payment dates embedded into the terms of issue) debt obligations of the Central Government.

 

 

State Government

The State Governments issue securities termed as State Development Loans (SDLs), which are medium to long-term maturity bonds floated to enable State Governments to fund their budget deficits.

Public Sector Undertakings

Public Sector Undertakings (PSUs) issue bonds which are medium to long-term coupon bearing debt securities. PSU Bonds can be of two types: taxable and tax-free bonds. These bonds are issued to finance the working capital requirements and long-term projects of public sector undertakings. PSUs can also issue Commercial Paper to finance their working capital requirements.

Scheduled Commercial Banks (SCBs)

Banks issue Certifi­cate of Deposit (CDs) which are unsecured, negotiable instru­ments. These are usually issued at a discount to face value. They are issued in periods when bank deposits volumes are low and banks perceive that they can get funds at low interest rates. Their period of issue ranges from 7 days to 1 year.

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