Money Market Operations [1/3]

Money Market Operations as on 13th June
Reserve Bank of India - Press Releases

The Reserve Bank implements its monetary policy by conducting various operations in government securities, foreign exchange and money markets.

Open Market Operations are carried out buy buying/selling government securities. They are an important means of managing the supply of money in the economy. RBI buys/sells government securities in the secondary market with help on electronic negotiated dealing system-order matching (NDS-OM) platform. The settlement of these transactions are done by Clearing Corporation of India Limited. It acts as counterparty for all trades in G-secs. The net funds settlement is done through the participating members’ current account maintained with RBI and. Securities are settled in SGL/CSGL accounts of members maintained with RBI.

Auction System was G-Secs was introduced in 1992.

Primary Dealer System was initiated in 1996

Monetary Policy, as defined by RBI, refers to the use of monetary instruments under the control of the central bank to regulate magnitudes such as interest rates,money supply and availability if credit with a view to achieving the ultimate objective of economic policy.

RBI releases data on its money market operation. The First Part of the Report refers to Money Markets

As per RBI’s Master Circular on Call/Notice Money Market Operations dated July 1, 2015, Money Market is a market for short-term financial assets that are close substitutes of money. This is because these instruments are liquid, that is, they can be converted into cash quickly. It helps borrowers meet urgent fund requirements and allows lenders to earn some extra income on the surplus cash they have for a short term.

Master Circular dated July 1, 2015 on Call/Notice Money Market Operations
Reserve Bank of India - Master Circulars

A. Overnight Segment
This segment deals with transactions limited to one day

I. Call Money - In call money market, funds are transacted, that is borrowing and lending is on an overnight basis or one day. On June 12, 2019, the total volume of transactions is Rs 2,345 billion or Rs 2,34,500 crores at a weighted average rate of 5.64% p.a. The range of interest rate for the day was 4.40-6.45

II. Tri Party Repo - As per RBI’s directionsTri-party repo is a type of repo contract where a third entity (apart from the borrower and lender), called a Tri-Party Agent, acts as an intermediary between the two parties to the repo transaction to facilitate services like collateral selection, payment and settlement, custody and management during the life of the transaction.

Repurchase Transactions (Repo) (Reserve Bank) Directions, 2018
Reserve Bank of India - Notifications

Tri-Party Repo (Reserve Bank) Directions, 2017
Reserve Bank of India - Notifications

III. Market Repo

IV. Repo in Corporate Bond - Repo in Corporate Bond in Overnight Segment refers to borrowing against the above eligible debt securities only for one day.

Related Posts:
Repo in Corporate Bond

Section 1 - Money Markets - Daily Money Market Operations

B. Term Segment
Notice Money - In notice money market, funds are transacted, that is borrowing and lending is for a minimum of 2 days and a maximum of 14 days. The borrowings can be done without collateral.On June 12, 2019, the total volume of transactions is Rs 1.09 billion or Rs 109 crores at a weighted average rate of 5.66% p.a. The range of interest rate for the day was 5.10-5.77%
Term Money - In term money market, funds are transacted for a minimum period of 15 days to one year without any collateral.

III. Tri Party Repo -

IV. Market Repo -

V. Repo in Corporate Bond -

Participants of Call/Notice Money Market - Scheduled commercial banks(but not RRBs), Co-operative Banks(but not Land Development Banks) and Primary Dealers (PDs) can participate as borrowers and lenders.

Interest Rates in call/money market is dependent on supply-demand.

Deals take place between 9:00 am to 5:00 pm on weekdays and from 9:00 am to 2:00 pm on 1st, 3rd Saturdays or as specified by RBI