. Below are the types of money market instruments:
Treasury Bills
T-bills are one of the most popular money market instruments. They have varying short-term maturities. The Government of India issues it at a discount for 14 days to 364 days. These instruments are issued at a discount and repaid at par at the time of maturity. Also, a company, firm, or person can purchase TB’s. And are issued in lots of Rs. 25,000 for 14 days & 91 days and Rs. 1,00,000 for 364 days.
Commercial Bills
Commercial bills, also a money market instrument, works more like the bill of exchange. Businesses issue them to meet their short-term money requirements. These instruments provide much better liquidity. As the same can be transferred from one person to another in case of immediate cash requirements.
Certificate of Deposit
Certificate of deposit or CD’s is a negotiable term deposit accepted by commercial banks. It is usually issued through a promissory note. CD’s can be issued to individuals, corporations, trusts, etc. Also, the CD’s can be issued by scheduled commercial banks at a discount. And the duration of these varies between 3 months to 1 year. The same, when issued by a financial institution, is issued for a minimum of 1 year and a maximum of 3 years.
Commercial Paper
Corporates issue CP’s to meet their short-term working capital requirements. Hence serves as an alternative to borrowing from a bank. Also, the period of commercial paper ranges from 15 days to 1 year.
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