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- Repos/reverse repos: A repo is a transaction in which one participant borrows money at a pre-determined rate against the collateral of eligible security for a specified period of time. A reverse repo is a lending transaction; a repo in the books of the borrower is a reverse repo in the books of the lender. Eligible collateral for repos and reverse repos are central and state government securities and select corporate bonds.
- Collateralized Borrowing and Lending OBLIGATION (CBLO): A Collateralized Borrowing and Lending Obligation (CBLO) is an instrument used to lend and borrow for SHORT periods, typically one to three days. The debt is fully secured against the collateral of government securities. CBLO is a standardized and traded repo.
- Certificates of Deposits (CDs): Certificates of Deposits (CDs) are short term tradable deposits issued by banks to raise funds. CDs are different from REGULAR bank deposits because they involve creation of securities. This makes the CD transferable before maturity. However, actual trading in CDs is extremely limited with most investors preferring to hold them to maturity.
- Treasury Bills: The central government borrows extensively in the money market for its daily operations through the issue of short-term debt securities called Treasury bills (T-bills). T-bills are issued for maturities of 91 days, 182 days and 364 days. They are issued through an auction process managed by the RBI and listed soon after issue. Banks, MUTUAL funds, INSURANCE companies, provident funds, primary dealers and FIs bid in these auctions.
- Commercial Paper: Companies and institutions raise short-term funds in the money market through the issue of commercial paper (CP). Though CPs are required to have a credit rating, they are unsecured corporate loans with a limited secondary market. They can be issued for various maturities of up to 364 days, but the 90-day CP is the most popular.
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