Thursday, 25 August 2016

BA' Disqus'sion: Preparation for GD

Dear Readers,

Welcome to BA Disqus'sions. SBI yesterday released GD-Interview(Phase-III) Call Letters and now you should start preparing to face Group Discussion. We’ve already given you some Tips for both Group Discussion and Personal Interview and now we’ll discuss some important topics for Group Discussion. Although nothing can be assured of what topic you might have to face in GD, but still you should have adequate knowledge regarding some important scenarios and topics. 


Today we’ll discuss Money Market. This topic is related to Banking and Finance Sector and if you are a Bank PO aspirant you should know enough to speak about Money Market.

This is the new initiative where a mod will conduct the discussion and all the irrelevant disruptions will be blocked. In this post, we are going to discuss some important points on the topic Money Market for Group Discussion. 

 Only subject related discussion and quizzes are allowed, so if you are on Banking Awareness Quiz, then quizzes and information related to Banking and Finance will be allowed.
☑ No other kind of chit chat will be permitted.
 Any body who indulges in chitchat in this particular page will be blocked right away(Without Warning)

  What do you understand by Money Market?
Money market basically refers to a section of the financial market where financial instruments with high liquidity and short-term maturities are traded. Money market has become a component of the financial market for buying and selling of securities of short-term maturities, of one year or less, such as treasury bills and commercial papers.
The most active part of the money market is the market for overnight call and term money between banks and institutions and repo transactions. Money Market is regulated by RBI.

  How will you further categorise Money Market?
Money Market can be further divided into 3 parts. They are:
a) Call Money Market- The market to get funds for 1 day only is called as Call Money Market.
b) Term Money Market- The market to get funds for 15 days to 1 year is called as Term Money Market.
c)  Notice Money Market- The market to get funds for 2 days to 14 days is called as Notice Money Market.

 What are Money Market Instruments?
The short-term debts and securities sold on the money markets—which are known as money market instruments—have maturities ranging from one day to one year and are extremely liquid.
Some of the Money Market instruments are:
Commercial Paper
 Certificate of Deposit
 Treasury bills

1) Commercial Papers:-
a) A CP is a short term security (7 days to 365 days) issued by a corporate entity (other than a bank), at a discount to the face value.
b) Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.
c) CPs normally give a higher return than fixed deposits & CDs.
d) CP can be issued in denominations of Rs. 5 lakh or multiples thereof. Amount invested by a single investor should not be less than Rs. 5 lakh (face value).
e) Only corporates who get an investment grade rating can issue CPs, as per RBI rules. It is issued at a discount to face value.
f) Bank and FI’s are prohibited from issuance and underwriting of CP’s.

2) Certificate of Deposit:-   
a) CDs are negotiable money market instrument issued in demat form or as a Usance Promissory Notes.
b) CDs issued by banks should not have the maturity less than seven days and not more than one year.
c) Financial Institutions are allowed to issue CDs for a period between 1 year and up to 3 years.
d) CDs are like bank term deposits but unlike traditional time deposits these are freely negotiable and are often referred to as Negotiable Certificates of Deposit.
e) CDs normally give a higher return than Bank term deposit.
f) All scheduled banks (except RRBs and Co-operative banks) are eligible to issue CDs.
g) CDs are issued in denominations of Rs. 1 Lac and in the multiples of Rs. 1 Lac thereafter.
h) Discount/Coupon rate of CD is determined by the issuing bank/FI.
i) Loans cannot be granted against CDs and Banks/FIs cannot buy back their own CDs before maturity

3) Treasury bills:-
a) Treasury Bills are short term (up to one year) borrowing instruments of the Government of India which enable investors to park their short term surplus funds while reducing their market risk.
b) They are auctioned by Reserve Bank of India at regular intervals and issued at a discount to face value.
c) Any person in India including Individuals, Firms, Companies, Corporate bodies, Trusts and Institutions can purchase Treasury Bills.
d) Treasury Bills are eligible securities for SLR purposes.
e) At present, RBI issues T-Bills for three different maturities: 91 days, 182 days and 364 days.

Remember GD is about expressing your knowledge and views, the more you are aware about the subject, the more it will help you to put forth your perspective firmly. 

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