call money market-commercial ppr

8/6/2019 Call Money Market-Commercial Ppr

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CALL/NOTICE MONEY MARKET

AND

COMMERCIAL PAPERS

PRESENTED BY:-

LOKENDRA MALVIYA

LOKESH SHARMA

MAHAVEER SHIVHARE

MANOJ BHAWNANI


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PARTICIPANTS IN THE CALL MONEY MARKET

Till 1971, UTI and LIC were allowed to operate as

lenders.

On 1978, brokers were also allowed to participate in

the market.

In 1990s, DFHI, STCI,GIC,NABARD,IDBI, money

market mutual funds, corporate and private sector mutual

funds entered as lenders.


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CALL RATE

Call rate is highly volatile in nature.

Within one fortnight, rates moved from1-2 % to over 140

% per annum.

There are two call rates in India:-

Inter-bank call rate.

Lending rate of DFHI in the call market.


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CALL MONEY MARKET

Source : RBI, Annual report 2009-10


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ROLE OF THE RBI IN THE CALL MONEY MARKET

The Reserve Bank intervenes in the call money

market indirectly in two ways-

By providing lines of finance/additional funding tothe DFHI and other call money dealers; and

By conducting repo auctions.


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SIZE OF THE CALL MONEY MARKET

Its average daily turnover at more than Rs.40,000 crore

in recent period is the highest among all money market

instruments including Government securities market.

Average

(2003-04 to

2007-08)

(5 years)

2007-08 2008-09 2009-10

Average Daily

Call Money

Market

Turnover

18492 21393 22436 15924

(In Rs. Crore)



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CALL MONEY MARKET



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NSE MIBID/MIBOR

NSE MIBID/MIBOR for the Day on 16-November-2010

Category Time MIBID SD(MIBID) MIBOR SD(MIBOR)

OVERNIGHT 9:40 a.m. 6.82 0.0131 6.91 0.0121

3 DAY 9:40 a.m. - - - -

14 DAY 11:30 a.m. 7.03 0.1272 7.26 0.0863

1 MONTH 11:30 a.m. 7.4 0.0908 7.69 0.0726

3 MONTH 11:30 a.m. 7.7 0.0855 8.01 0.0864

NSE MIBID is stands for Mumbai Inter-bank Bid Rate

NSE MIBOR is stands for Mumbai Inter-bank Offer Rate


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FACTORS INFLUENCING CALL MONEY MARKET RATE

Liquidity Conditions

Reserve Requirement Prescriptions and

stipulations Regarding Average Reserve

Maintenance. Structural Factors

Investment Policy ofNon-Bank Participants in

the Call Market who are the MajorLenders of

Funds in the Call Market.

Liquidity Changes and Gaps in the Foreign

Exchange Market.


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COMMERCIAL PAPER


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INTRODUCTION

What is commercial paper ?

How and when commercial paper Came into market ?

Who can issue commercial papers ?

Commercial papers can be issued to

Rating requirements in commercial papers..

Other information


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PROCESS FOR ISSUING A CP

firstly a resolution has to be passed by board of

directors of the company

The cp issue than has to be rated by a CREDIT

RATING AGENCY

Than company has to select an IPA

Document verification by the IPA

The company than has to arrange for DEALERS such

as MERCHANT BANKERS ,BROKERS AND

BANKS..


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GUIDELINES RELATING TO CP

1) Eligibility. 6) Issuing and paying age

2) Rating requirement. 7) Investment in CP.

3) Maturity. 8) Mode of issuance.

4) Denomination. 9) Preference for DEMAT.

5) Limits and amount. 10) Stand by facility.


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FORTNIGHTLY ISSUANCES IN CP MARKET



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Issuer

Isuing and paying agent (IPA)

Credit rating agency (CRA)


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SECONDARY MARKET IN CP

There was a very little activity in the secondary market

in CPs due to the investors preference to hold the

instrument till maturity. The market is developing with

the entry of foreign and private sector banks who are

becoming the major players. Mutual funds also preferthe secondary market route as the stamp duty for

issuing CPs is higher at 0.5% for mutual funds than for

banks, which stands at 0.2%. Mutual funds are active

players in the CP secondary market. Mutual funds buythe paper in the secondary market through banks who

pay a lower stamp duty in the primary market.


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CP RATE MOVEMENTS



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FACTORS INHIBITING THE GROWTH OF THE CP MARKET

Small Size of Investment

Administrative Difficulties and Complex

Procedural Formalities

Non-bank institutional investors are not big

buyers in this market.

Stamp Duty Levy

Minimum Maturity Period of 7 days


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THANK YOU

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