Commodities exchange

Call money is one of the most liquid instruments. The validity is generally one working day. Banks can face shortfalls that can be solved by borrowing through call money. In contrast, those with surplus cash can invest in other banks through call money.

Call money work a, statutory reserves the minimum cash balance which banks must hold as part of the central bank’s mandate to ensure enough liquid cash for daily operations. The investment is available to other financial as well. Borrowing and lending take place at the call rate. With no organized market, the transactions generally occur using phone calls/emails/faxes.

T bills are issued by a country’s central bank on behalf of its government. The government often raises funds through Treasury Bills that provide quick money. In the money market, it is considered one of the safest investments due to government backing. They don’t offer an interest income.

T-bills are issued at a discount and redeemed at par, with the investor pocketing the difference as profit. The tenure of T-bills is generally from 14 days to 364 days.

Companies generally use commercial papers to fund their short-term working capital needs, such as payment of accounts reversible, inventory purchases, etc. However, these are unsecured. As such, in case of liquidation of the company, they will not have priority against other secured financial short-term instruments.

CPs come with an average maturity of two odd months. However, just like the Treasury Bills, these are also issued at a discount, and therefore, they don’t come with separate interests.

A certificate of deposit is a type of time deposit with the bank. Only a bank can issue a CD. Like all other time deposits, CDs also have a fixed maturity date and cannot be withdrawn before maturity. This acts as a major disadvantage for the instrument.

Repo is a repurchase agreement with repo as its abbreviation. For example, Bank A in need of funds, with Bank B has surplus funds. Bank A will agree with Bank B to sell its securities (mostly Treasury Bills). Bank B will receive the required funds. However, on a fixed date in future, Bank A will repurchase these securities from Bank B as part of the agreement.

These are very short-term in nature. Tenure ranges from overnight to a month, while the securities can be directly transferred without the credit risk