Innovative Financial Instruments 🔍

Apart from shares and debentures, companies and banks use Money Market Instruments for short-term funds.

1. Commercial Paper (CP) 📄

• Issuer: Large, highly rated Corporates.
• Purpose: Short-term working capital.
• Nature: Unsecured Promissory Note.
• Maturity: 7 days to 1 year.
• Interest: Issued at Discount to Face Value (e.g., Face Value ₹100, Issued at ₹95. You get ₹100 on maturity).

2. Certificate of Deposit (CD) 🏦

• Issuer: Banks and Financial Institutions.
• Purpose: To raise funds when deposit growth is slow.
• Nature: Negotiable (Tradable).
• Maturity: 7 days to 1 year (for Banks).
• Interest: Issued at Discount.

3. Treasury Bills (T-Bills) 🇮🇳

• Issuer: RBI on behalf of Government of India.
• Purpose: Short-term government borrowing.
• Safety: Zero Risk (Sovereign Guarantee).
• Tenures: 91 days, 182 days, 364 days.
• Interest: Issued at Discount.

4. Zero Coupon Bonds 0️⃣

• Bonds that pay NO interest (Coupon = 0).
• Profit: Sold at deep discount (e.g., Sold at ₹60, Redeemed at ₹100 after 5 years).
• Benefit: No periodic interest payment pressure for issuer.

5. Floating Rate Bonds 🌊

• Interest rate is NOT fixed.
• Linked to a benchmark (e.g., Repo Rate + 2%).
• Benefit: Protects investor if interest rates rise.

Quiz Time! 🎯

💡 Final Wisdom: "Money Market instruments are the unsung heroes. They keep the cash flowing for Governments, Banks, and Corporates!" 💸🔄

Next up: Challenges Facing the Financial Services Sector - It's not all rosy! 🥀