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Treasury Bills (TBs)
⇒ T-Bills are the most important and used mean for the government to acquire money from the market, to maintain its money requirements.
⇒ Introduced in 1987
⇒ Issued By → RBI ( On behalf of the government ).
⇒ Type of debenture.
⇒ Doesn’t require any collateral as security
⇒ Five types of the TBs in due course of time:
(a) 14-day (Intermediate TBs) –discontinued in 2001.
(b) 14-day (Auctionable TBs) – discontinued in 2001.
(c) 91-day TBs
(d) 182-day TBs
(e) 364-day TBs
⇒ Issued on discount basis and can be redeemed at par.
⇒ Doesn’t bear any interest.
Certificate of Deposit (CD)
CDs are certificates issued by banks or other financial institutions to the general public, to raise short-term resources
⇒ Is a negotiable money market instrument.
⇒ Issued in dematerialised form
⇒ Issuer – Scheduled Commercial Banks (excluding RRBs), permit-granted Financial Institutions (FIs)
Issued to – individuals, corporations, companies (including banks), trusts, etc.
⇒ Bank CDs (7 days – 1 year) and FI CDs (1 – 3 years)
⇒ Minimum amount – 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
⇒ Issued at a discount on face value.
⇒ Are freely transferable .
Commercial Paper (CP)
Commercial Paper is a ‘money market instrument’ under Section 45W of the Reserve Bank of India Act. Commercial Paper’ (CP) is an unsecured money market instrument issued in the form of a promissory note.
⇒ Eligible Issuers:
- Companies, including Non-Banking Finance Companies (NBFCs) and All India Financial Institutions (AIFIs), are eligible to issue CPs
- Other entities like co-operative societies/unions, government entities, trusts, limited liability partnerships and any other body corporate having presence in India with a net worth of ₹ 100 crore or higher
- Any other entity specifically permitted by the Reserve Bank of India (RBI).
⇒ Eligible Investors:
- All residents, and non-residents permitted to invest in CPs under Foreign Exchange Management Act (FEMA), 1999 are eligible to invest in CPs; however, no person can invest in CPs issued by related parties either in the primary or secondary market.
- Investment by regulated financial sector entities will be subject to such conditions as the concerned regulator may impose.
⇒ CP shall be issued in the form of a promissory note
⇒ Held in a dematerialized form
⇒ Maturity – 7 days to 1 year
⇒ Minimum size – Minimum amount of CP is Rs. 5 lakh and multiple thereof
⇒ CP shall be issued at a discount to face value.
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