Money Market Instruments in India: The Short Answer
The money market is the market for short-term borrowing and lending of up to one year. The main money market instruments in India are Treasury Bills (T-bills), Cash Management Bills (CMBs), Commercial Paper (CP), Certificates of Deposit (CD), call money, notice money and term money, market repo and TREPS (Tri-party Repo). The RBI regulates the money market, and most trades are settled through the Clearing Corporation of India Ltd (CCIL).
Key takeaway for bank exams: Memorise the tenure line: call money 1 day, notice money 2–14 days, term money 15 days to 1 year, T-bills 91, 182 and 364 days, CMBs less than 91 days, CP and CD 7 days to 1 year, both in units of ₹5 lakh. Companies issue CP; banks issue CD; the RBI issues T-bills for the Government.
Rules below are checked against the RBI's Master Directions on Commercial Paper and NCDs (2024), Certificate of Deposit, and Call, Notice and Term Money, and the RBI's Government Securities primer. Current policy rates are in our RBI monetary policy October 2026 highlights.
What Is the Money Market? Money Market vs Capital Market
| Point | Money market | Capital market |
|---|---|---|
| Time period | Up to 1 year | More than 1 year |
| Purpose | Short-term liquidity (working capital, day-to-day cash) | Long-term funds (projects, expansion) |
| Instruments | T-bills, CMBs, CP, CD, call money, repo, TREPS | Shares, bonds, debentures, dated G-secs |
| Regulator | RBI | SEBI (dated G-secs: RBI) |
| Risk and return | Low risk, low return, highly liquid | Higher risk, higher possible return |
The money market also passes the RBI's policy rate to the rest of the economy: the RBI targets the weighted average call rate (WACR) as the operating target of monetary policy.
List of Money Market Instruments in India (Master Table)
| Instrument | Issued by | Tenure | Minimum amount | Secured? |
|---|---|---|---|---|
| Treasury Bill (T-bill) | RBI on behalf of the Government of India | 91, 182, 364 days | ₹10,000 and multiples of ₹10,000 | Sovereign (no default risk) |
| Cash Management Bill (CMB) | RBI on behalf of the Government | Less than 91 days | Same as T-bills | Sovereign |
| Commercial Paper (CP) | Companies, NBFCs, all-India financial institutions | 7 days to 1 year | ₹5 lakh and multiples of ₹5 lakh | Unsecured promissory note |
| Certificate of Deposit (CD) | Scheduled commercial banks, RRBs, small finance banks | 7 days to 1 year | ₹5 lakh and multiples of ₹5 lakh | Unsecured, negotiable |
| Call money | Inter-bank (banks, primary dealers) | Overnight (1 day) | — | Unsecured |
| Notice money | Inter-bank | 2 to 14 days | — | Unsecured |
| Term money | Inter-bank | 15 days to 1 year | — | Unsecured |
| Market repo | Banks, PDs, NBFCs, mutual funds and others | Usually overnight to short term | — | Secured by G-secs or eligible bonds |
| TREPS (Tri-party Repo) | Run by CCIL | Overnight to up to 1 year | — | Secured (G-secs) |
Treasury Bills (T-Bills) and Cash Management Bills
- Zero-coupon: T-bills pay no interest; they are sold at a discount and repaid at face value. Example from the RBI primer: a 91-day T-bill of face value ₹100 issued at ₹98.20 earns ₹1.80.
- Three tenors: 91-day, 182-day and 364-day. The RBI auctions them for the Government every week, as per a quarterly auction calendar.
- Cash Management Bills were introduced by the Government in consultation with the RBI in 2010 to meet temporary cash mismatches; their tenure is less than 91 days.
- T-bills count as SLR securities for banks. Individuals can buy them through RBI Retail Direct.
Commercial Paper (CP): Features
| Feature | Rule (RBI Master Direction on CP and NCDs, 3 January 2024) |
|---|---|
| Nature | Unsecured money market instrument in the form of a promissory note |
| Who issues | Companies, NBFCs (including HFCs), all-India financial institutions and other eligible bodies |
| Tenure | Not less than 7 days, not more than 1 year |
| Denomination | ₹5 lakh and multiples of ₹5 lakh |
| Form | Dematerialised only, held with a SEBI-registered depository |
| Price | Issued at a discount to face value |
| Not allowed | Call/put options, underwriting or co-acceptance |
| Investors | All residents; non-residents within FEMA limits; no investment in CPs of related parties |
Certificate of Deposit (CD): Features
| Feature | Rule (RBI Master Direction on CDs) |
|---|---|
| Nature | Negotiable, unsecured instrument issued by a bank as a usance promissory note against funds deposited |
| Who issues | Scheduled commercial banks, Regional Rural Banks and small finance banks |
| Tenure | Not less than 7 days, not more than 1 year |
| Denomination | ₹5 lakh and multiples of ₹5 lakh |
| Form | Dematerialised only |
| Price | At a discount, or with a fixed or floating coupon linked to a published benchmark |
| Settlement | T+1 after the offer period closes |
CP vs CD in one line: a company borrows through CP; a bank borrows through CD.
Call Money, Notice Money and Term Money
| Market | Period | Key point |
|---|---|---|
| Call money | Overnight (repaid the next working day) | The WACR (weighted average call rate) is the RBI's operating target |
| Notice money | 2 to 14 days | Same participants as call money |
| Term money | 15 days to 1 year | Inter-bank unsecured borrowing for longer gaps |
These are unsecured inter-bank markets open mainly to scheduled banks and primary dealers; trades are reported on the NDS-Call platform run by CCIL.
Repo, Reverse Repo and TREPS in the Money Market
- Repo (repurchase agreement): a borrower sells securities and agrees to buy them back later at a set price; it is collateralised borrowing. The RBI's policy repo rate is the rate at which it lends to banks under the Liquidity Adjustment Facility.
- Reverse repo: the opposite side (lending against securities). For absorbing surplus money, the RBI now mainly uses the Standing Deposit Facility (SDF), which needs no collateral.
- TREPS (Tri-party Repo): a repo where CCIL acts as the third party that manages collateral and guarantees settlement. TREPS replaced CBLO (Collateralised Borrowing and Lending Obligation) in November 2018.
- Policy rates (October 2026): repo 5.50%, SDF 5.25%, MSF and Bank Rate 5.75% (after the MPC's 7 October 2026 decision). See monetary policy tools of RBI.
Worked Examples: Yield on T-Bills and CP
The yield on a discount instrument = (Face value − Price) ÷ Price × (365 ÷ days) × 100.
Example 1 (91-day T-bill). Face value ₹100, price ₹98.70. Gain = 100 − 98.70 = ₹1.30. Yield = 1.30 ÷ 98.70 × 365 ÷ 91 × 100 = about 5.28% a year.
Example 2 (182-day T-bill). Face value ₹100, price ₹97.10. Gain = ₹2.90. Yield = 2.90 ÷ 97.10 × 365 ÷ 182 × 100 = about 5.99% a year.
Example 3 (90-day CP). Face value ₹5,00,000 (the minimum lot), issued at ₹4,92,000. Gain = ₹8,000. Yield = 8,000 ÷ 4,92,000 × 365 ÷ 90 × 100 = about 6.59% a year. The CP yields more than a T-bill because a company carries credit risk, while the Government does not.
Money Market Instruments Quick Revision Table
| Asked as | Answer |
|---|---|
| Money market period | Up to 1 year |
| Regulator | RBI |
| T-bill tenors | 91, 182, 364 days |
| T-bill type | Zero-coupon, issued at discount |
| CMB tenure / year introduced | Less than 91 days / 2010 |
| CP issuer | Companies, NBFCs, AIFIs |
| CD issuer | SCBs, RRBs, SFBs |
| CP and CD tenure | 7 days to 1 year |
| CP and CD minimum | ₹5 lakh and multiples |
| Call / notice / term money | 1 day / 2–14 days / 15 days–1 year |
| RBI operating target | Weighted average call rate (WACR) |
| TREPS replaced | CBLO (November 2018) |
| TREPS run by | CCIL |
Money Market Instruments Questions with Answers (Practice Set)
Q1. Which of the following is NOT a money market instrument? (a) Treasury Bill (b) Commercial Paper (c) Equity share (d) Certificate of Deposit Answer: (c). Equity shares are capital market instruments.
Q2. Treasury Bills in India are issued for which tenors? (a) 30, 60, 90 days (b) 91, 182, 364 days (c) 14, 91, 182 days (d) 91, 182, 365 days Answer: (b). 91, 182 and 364 days.
Q3. Notice money refers to borrowing for: (a) 1 day (b) 2 to 14 days (c) 15 days to 1 year (d) more than 1 year Answer: (b). 2 to 14 days; overnight is call money and 15 days to 1 year is term money.
Q4. What is the minimum denomination of a Commercial Paper? (a) ₹1 lakh (b) ₹5 lakh (c) ₹10 lakh (d) ₹25 lakh Answer: (b). ₹5 lakh and multiples of ₹5 lakh.
Q5. Certificates of Deposit can be issued by: (a) Only the RBI (b) Corporates (c) Scheduled commercial banks, RRBs and small finance banks (d) Mutual funds Answer: (c).
Q6. TREPS replaced which instrument in 2018? (a) CMB (b) CBLO (c) LAF (d) MSF Answer: (b). Collateralised Borrowing and Lending Obligation.
Q7. Cash Management Bills have a maturity of: (a) less than 91 days (b) exactly 91 days (c) 182 days (d) 364 days Answer: (a).
Q8. Which rate is the operating target of the RBI's monetary policy? (a) Bank Rate (b) MCLR (c) Weighted average call rate (d) 10-year G-sec yield Answer: (c). WACR.
Q9. A 91-day T-bill with face value ₹100 is bought at ₹98.70. Its annualised yield is about: (a) 4.95% (b) 5.28% (c) 5.75% (d) 6.10% Answer: (b). 1.30 ÷ 98.70 × 365 ÷ 91 × 100 ≈ 5.28%.
Q10. The minimum tenure of a Commercial Paper is: (a) 1 day (b) 7 days (c) 15 days (d) 30 days Answer: (b). 7 days; the maximum is 1 year.
Money Market Instruments FAQs
What are the money market instruments in India?
Treasury Bills, Cash Management Bills, Commercial Paper, Certificates of Deposit, call, notice and term money, market repo and TREPS. All are short-term, up to one year.
Who regulates the money market in India?
The Reserve Bank of India. Most money market trades are cleared and settled through CCIL.
What is the difference between Commercial Paper and Certificate of Deposit?
CP is an unsecured promissory note issued by companies, NBFCs and financial institutions; a CD is issued by banks against deposits. Both run from 7 days to 1 year and come in lots of ₹5 lakh.
Why are Treasury Bills called zero-coupon securities?
Because they pay no interest. They are sold below face value and repaid at face value, so the discount is the investor's return.
What is TREPS?
Tri-party Repo: a collateralised borrowing system in which CCIL acts as the third party that manages collateral and guarantees settlement. It replaced CBLO in November 2018.
Is the money market part of the financial market?
Yes. The financial market has two parts: the money market (up to one year) and the capital market (more than one year).
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