Money Market and Capital Market Instruments

Financial Market plays a very important role in development of any country because it is place where liquidity requirement who needs money like industries to meet their expansion plans and those who want to earn better rate of interest on the surplus funds are met .Individuals and financial institution having surplus money come to earn better rate of interest Financial market is a platform where buyers and sellers are involved in sale and purchase of financial products like shares, mutual funds, certificate of deposit ,bonds and so on.

Any industry like reliance ,tatas or government needs money to meet liquidity requirement come to financial market .Financial market act as intermediary between those who need money and who want to invest their money to earn better rate of interest.

Financial market are divided in two types depends on duration for which they need money.

There are two types of financial market :
  1. Money Market 
  2. Capital Market

Money Market

It is one part of financial market where instruments like securities ,bonds having short term maturities usually less than one year are traded  is know as Money market .Organization or Financial institutions having short term money requirement less than one year to meet immediate needs like buying inventories, raw material ,paying loans come to Money Market. It involves lending and borrowing of short term funds. Money market instruments like treasury bills, certificate of deposit and bills of exchange are traded their having maturity less than one year .Investment in money market is safe but it gives low rate of return.

Money Market is regulated by R.B.I in India  and instrument having maturity less than one year usually traded in money markets

Major Players in Money Market:-
  1. RBI 
  2. Central Government 
  3. State Governments 
  4. Banks 
  5. Financial Institutions 
  6. Micro Finance Institutions 
  7. Foreign Institutional Investors (FII) 
  8. Mutual Funds

Money Market Instruments

1. Treasury Bills
2. Commercial Papers
3. Certificate of Deposit
4. Bankers Acceptance
5. Repurchase Agreement

1. Treasury Bills

Treasury Bills are also know as T-Bills. This is one of safest instrument to invest .T-bills are issued by RBI  backed by government security. RBI issue treasury bills on the behalf of central government to meet the short term liquidity needs of central government bills are issued at a discount to face value, on maturity face value is paid to holder.
At present , the Government of India issues three types of treasury bills through auctions, for 91-day, 182-day and 364-day. Treasury bills are available for a minimum amount of Rs.25,000 and in multiples of Rs. 25,000.
Treasury bills are also issued under the Market Stabilization Scheme (MSS).In this if RBI want to absorb excess liquidity it can issue T-bills .

2. Commercial Papers (CP)

Commercial papers are issue by private organizations or financial institutions having strong credit rating to meet short term liquidity requirements. These are unsecured instruments as these are not backed by any security. The return on commercial papers is usually higher than T-bills. Different rating agencies ,rate the commercial paper before issue by any organization .If commercial paper carrying good rating means it is safe to invest and carrying lower risk of default .

All corporate are not eligible to issue CP, only who met certain defined criteria by RBI are eligible to issue CP.

CP can be issued for maturities between a minimum of 7 days and a maximum of up to one year from the date of issue and can be issued not less than 5 lakhs and multiples thereafter.

3. Certificate Of Deposit

Certificate of Deposit (CD) is a money market instrument. CDs can be issued by  scheduled commercial banks and  select All-India Financial Institutions (FIs) that have been permitted by RBI to raise short-term resources. Minimum amount of a CD should be Rs.1 lakh, i.e., the minimum deposit that could be accepted from a single subscriber should not be less than Rs.1 lakh, and in multiples of Rs. 1 lakh thereafter. The maturity period of CDs issued by banks should not be less than 7 days and not more than one year, from the date of issue. CDs may be issued at a discount on face value.

In this a person invest his money  in COD  and after the end of maturity period he receives money along with interest.

4. Bankers Acceptance

Bankers Acceptance is also a money market instrument to meet short term liquidity requirement .In this company provides bank guarantee to seller to pay amount of good purchased at agreed future date . In case buyer failed to pay on agreed date , seller can invoke bank guarantee . It is usually used to finance export and import.

5. Repurchase Agreement

Repurchase agreement is also know as Repo .It is money market instrument .In this one party sell his asset usually government securities  to other party and agreed to buy this asset on future agreed date . The seller pays an interest rate, called the repo rate, when buying back the securities. This is like a short term loan given by buyer of security to seller of security to meet immediate financial needs.

Major Players in Money Market:-

1.S.E.B.I
2.Central and State Government
3.Financial Institutions like L.I.C.
4.Financial intermediaries like stock brokers
5.Individuals
6.Corporate houses
7.Insurance companies

Capital Market

 Capital market is also very important part of Indian financial system .This segment of financial market meant to meet long term financial needs usually more than one year or more .Companies like manufacturing , infrastructure power generation and governments which need funds for longer duration period  raise money from capital market. Individuals and financial institutions who have surplus fund and want to earn higher rate of interest usually invest in capital market .
S.E.B.I. regulate the capital market in India .It set the transparent mechanism rules and regulations for investors and borrowers .It task is to protect the interest of investors and promote the growth of capital market.

 Capital market can be primary market and secondary market . In primary market new securities are issued where as in secondary market already issue securities are traded.
Capital market  is divided into two
1.Equity
2.Bond

Capital Market Instruments

1. Shares
2. Debentures
3. Bonds

Equities

Equity market generally know as stock .In this company want to raise money issue shares  in share market like B.S.E.or N.S.E.to individual or financial institutions who want to invest their surplus money

Shares can be issued in two ways:

If company issuing share for first time that it is know as I.P.O.(Initial Public Offering ).IPO  of any company issued in primary market and if company issuing shares for second or third time than it is know as FPO(Follow on Public Offering ) and trading of already issued shares take place in secondary market.
Share gives ownership right to individuals who subscribe to it ,in this way company has to dilute his ownership right Same way public sector undertakings dilute up to 49 percent of their ownership and keep remaining 51 percent with them so that they have majority control.
A person earns from shares is company make profit which is distributed among share holders  know as dividend and if company make loss value of share also falls so shares are high risk instruments

Bond or Debt

Bond market is also know as Debt market. A debt instrument is used by government or organization to generate funds for longer duration. The relation between person who invest in debt instrument is of lender and borrower .This gives no ownership right .A person receives fixed rate of interest on debt instrument.
If any company or organization want to raise money for long term purpose without diluting his ownership that it is know as Debentures. These are backed by security so there is no risk involves but return on these instrument is low as compared to shares .Company pay fixed rate of interest on debentures.

If government want to generate funds to meet long term needs like infrastructure it issue bonds know as sovereign bonds which are backed by government security so there is no risk
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70 comments:

  1. sir 2 id proof lagenge kya??

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  2. Thank u sir..

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  3. Sir I don't hv degree of graduation .. So, wat shld I do Nw?? Provisional wl not work??

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  4. Sir mne b.tech 2012 m kr li ti or marksheet n provisonal 2014 ka n mne app form m pass out date 2012 dali hui h koi problem hogi

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  5. Hello Raman sir I have one doubt. Sir i have my graduation degree and all marksheets except one i.e my 6th sem marksheet. Due to some printing mistake my college is not able to issue me the original one but i have its printout and is attested by chief examination officer.. Will it be sufficient or will they reject it?

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  6. Please reply as soon as possible I am in a big conundrum.

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  7. Plz reply at kamiya .minakshi@gmail .com plz sir

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  8. protest against injustice

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  9. Get it signed by your college principal, you need to sign an application at the time of interview stating that you will submit all the documents at the time of joining.

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  10. Cutoff would be around 45.

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  11. For gnrl,48…

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  12. Gáuràv Upadhyay ShármàJanuary 3, 2015 at 3:42 PM

    Provisional degree will work.

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  13. I have application form in which i have applied degree and status of my degree is pending there. Will it work as aprovisional degree?

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  14. @ramandip sir
    I have written my name in application as kalpankumar whereas in my gratuation marksheet and degree certificate it is only kalpan.then need to do affidavit or not ?

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  15. provisional will be allowed.

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  16. Ramandeep Ji...I dont know if anybody acknowledges this or not but your articles are very helpful..be it exams or interviews...D way u hv explained this topic and d ratios one is splendid...commendable...thank u so much on behalf of everybody who is benefiting out of it....

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  17. Thankyou very much Sir

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  18. Thank.you.ramandeep sir for entertaining my query via phone, thankyou a lot

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  19. yar even.i.thought for.a while.mai.mahan.hoon ehen.i.saw this mistake.in.my.form lol.n.thanks.i.wish it wontvcreate.any problem

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  20. Sir what do you think will be the cut off on combined score(written+interview) for IBPS PO??

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  21. sir is it required latest cast certificate .for sc/st candidates..?

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  22. it should be after 12-08-13

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  23. beAUTIFUL article sir

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  24. Raman sir,, i left my job in jan 2014 and not working anywhere currently, apart from the experience letter, do i need something else?

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  25. Hello Raman sir,plz help me..
    I have provisional certificate and indivdual marklists but don't have cmm.will it create any problem for ibps PO interview

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  26. ramamdeep ji........... i am in touch with this site for the last 6 month.. and i found it most useful...
    thanks

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  27. Gáuràv Upadhyay ShármàJanuary 3, 2015 at 9:28 PM

    No u hv to get provisional degree from ur university

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  28. sir what about character certificate n biodata forms...plz rly me...

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  29. oh good,my attempt is 128 i think..... general catogery...

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  30. No. Not required exactly. You can't get your ST certificate made in their format in such a short span. They will tell you to get the certificate in their format at the time of joining the bank whichever is allotted to you. However your existing certificate must be a valid one with all the necessary stamps of Executive Magistrate or so and should be in your name.

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  31. That means you qualified SC category cutoff. Your marks can be even amongst the toppers which you would be knowing very well with regard to your attempt in the exam.

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  32. My interview is on 20th Jan at 1pm in PNB Circle Office Ludhiana. I am from Punjab. SC category.

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  33. wow...you have explained this topic in such an easy language...I've read this topic in various books and sites ..but you have best explained it...easy to memorize,,,thanks....Keep posting such articles ...will be useful for Interview

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  34. Wen tis interview getting over

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  35. Wat ll be the expected date of result

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  36. Thanks for the reply. Feeling relieved now. My certificate is in Hindi, is that fine ?

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  37. no its works..dnt wry

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  38. i have interview for ibps po on 20/1/15, i m from ST catgory,i have caste certificte, they have mentioned in callletr to carry castcertificate according to ibps proforma, should i prepare caste certificte according to proforma,and from whom shld it be signed?plz help it is creating so much confusion

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  39. u r from which place?i belong to st. mine on 21/1/15.yes in same proforma..u shld get it signed by not less than thasildar cader.

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  40. Wen u attended interview? Date?

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  41. sir i have only provisional degree only if it works then when should i will submit as i dont have origina convocation as i did nt applied because of finance problem pls kindly reply

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  42. Interview se pehle shaadi karwa le bhai

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  43. I've minor error in my first name.

    In my 10th class certificate and passport, it is written as Kamal Preet Singh Purewal (Space in first name).
    However, in graduation certificates, my name is without space in first name (Kamalpreet Singh Purewal)
    And I have used my first name with space, that is one as on 10th class certificate for application form for PO-IV.
    Do i need an affidavit or something?

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  44. I dont hv my degree certi. Of graguation.. Igot my rslt lst yr in may so the university didn't. Give me? Wht 2 do nw

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  45. raman sir... u have very good teaching skills...thanq so much...

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  46. its r pleasure 2 have u sir...

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  47. Gáuràv Upadhyay ShármàJanuary 5, 2015 at 9:21 PM

    It will work I am also having only provisional and I appeared for sbi clerk interview nd they accepted it therefore there will be no problem just carry ur provisional one

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  48. Gáuràv Upadhyay ShármàJanuary 5, 2015 at 9:22 PM

    Nd suppose if it didnt worked then they will ask u to sign an undertaking in which it will be mentioned tht u wl submit during joining

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  49. Gáuràv Upadhyay ShármàJanuary 5, 2015 at 9:24 PM

    Nd I m nt sir call me gaurav

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  50. i dnt hv provisnl also... i pasd lst yr only.. vl showing consolidatd marks sheet work?

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  51. plzz plzz rplyy sir
    i pasd my grad lst yr only so i dnt hv my degree certi. n provisnl also... cn showing my marks sheet work in the interview?

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  52. atlst 52 for general category

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  53. my attempt is 128 and cat:GENERAL

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  54. Oh great ajit...will u send ur mail id so that we can have a small chat on imp things..mine is KISHOREREDDY.2121@GMAIL.COM

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  55. Hi everyone,
    I am Btech 2014 passout. I am not having my Original Degree. But i Have my PC dated 16/9/2014. My last sem Marks memo was issued with date as 16/8/2014. I read on the IBPS notification that degree should be before 11'/8/2014.

    Actually my results were declared earlier in june itself. I have a web print taken in JUNE. will this technical error stop me from giving interview..

    Help Please..

    ReplyDelete
  56. Hi everyone,
    I am Btech 2014 passout. I am not having my Original Degree. But i Have my PC dated 16/9/2014. My last sem Marks memo was issued with date as 16/8/2014. I read on the IBPS notification that degree should be before 11'/8/2014.

    Actually my results were declared earlier in june itself. I have a web print taken in JUNE. will this technical error stop me from giving interview..

    Help me Please..

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  57. Cutoff would be around 47.8 and a student getting 40 in wrtn is sure to qualfy even if he gets 8 marks i.e 40.

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  58. ya.. i think it may increase or decrease
    but dont worry..about attempts..bcoz it depends on accuracy..:)

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  59. Sir i got shortlisted for ibps iv clerical
    interview but my problem is that i got my OBC certificate on 12-09-2014
    which is 11 days ahead of the last date of online registration
    01-19-2014 as mentioned in the notification that certificate must be
    prior to last date of application. Am i eligible to get in to interview
    process. Kindly guide me.

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  60. reply me to the email id:umahita@gmail.com

    ReplyDelete
  61. Exactly as u said sir my score is 84 thank u for ur information

    ReplyDelete

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