Money Market Instruments in India

• CBLO Collateralised Borrowing and Lending Obligations (CBLOs) are money market instruments, allowing secured, short-term borrowing and lending against government securities as collateral.
• Now TREPS CBLO has since been replaced by TREPS, or Tri-Party Repo. It offers a safer, more efficient way for participants to borrow and lend funds overnight, still secured against government securities.
• Call Money The Call Money market, by contrast, is uncollateralized. It is for mostly overnight lending and borrowing, open only to scheduled commercial banks and primary dealers.

• Treasury Bills Treasury Bills are short-term, zero-coupon securities issued by the Government of India at a discount, redeemed at face value. They come in tenors of 91, 182, or 364 days.
• Commercial Paper Commercial Paper is an unsecured money market instrument, issued by companies as a promissory note, held in dematerialized form.
• Certificate of Deposit A Certificate of Deposit is a short-term debt instrument issued by banks to investors, similar in spirit to commercial paper but issued by banking institutions.
• Common Thread All money market instruments share one trait: a maturity of one year or less. This distinguishes them from longer-term capital market instruments like bonds and equities.

• Retail Direct RBI’s Retail Direct scheme lets retail investors open a free Retail Direct Gilt (RDG) account with RBI. They can then invest directly in Treasury Bills and other Government of India securities.
• Primary and Secondary Retail Direct account holders can buy government securities both in the primary market (at RBI auctions) and on the secondary market.
• NDS-OM The Negotiated Dealing System-Order Matching (NDS-OM) is RBI’s own screen-based, anonymous electronic platform. It is used for secondary-market trading in government securities.
• Not CDSL NDS-OM is a trading platform, not a depository. Depositories like CDSL are a separate part of the market infrastructure — see IndEco0008 — Capital Market for more on how CDSL fits in.

Asked as: “With reference to India, consider the following statements: 1. Retail investors through demat account can invest in ‘Treasury Bills’ and ‘Government of India Debt Bonds’ in primary market. 2. The ‘Negotiated Dealing System-Order Matching’ is a government securities trading platform of the Reserve Bank of India.” (UPSC CSP 2021, GS Paper I). View this question.

• UPSC 2024 Asked as: “With reference to the Indian economy, Collateral Borrowing and Lending Obligations are the instruments of:” (UPSC CSP 2024, GS Paper I). CBLOs are money market instruments. See the full transcription at UPSC CSP 2024 GS Paper I, Q40.

• UPSC 2020 Asked as: “With reference to the Indian economy, consider the following statements: 1. ‘Commercial Paper’ is a short-term unsecured promissory note. 2. ‘Certificate of Deposit’ is a long-term instrument issued by the Reserve Bank of India to a corporation. 3. ‘Call Money’ is a short-term finance used for interbank transactions. 4. ‘Zero-Coupon Bonds’ are the interest bearing short-term bonds issued by the Scheduled Commercial Banks to corporations.” (UPSC CSP 2020, GS Paper I). The correct answer is (c) 1 and 3 only. Commercial Paper is indeed a short-term unsecured promissory note, and Call Money is short-term interbank finance. A Certificate of Deposit is issued by banks and financial institutions, not by the RBI to a corporation, and Zero-Coupon Bonds pay no periodic interest at all. See the full transcription at UPSC CSP 2020 GS Paper I, Q70.

• UPSC 2018 Asked as: “Consider the following statements: 1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities. 2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments. 3. Treasury bills offer are issued at a discount from the par value.” (UPSC CSP 2018, GS Paper I). The correct answer is (c) 2 and 3 only. The RBI manages and services securities for both the Centre and the states, so statement 1 is wrong. Only the Central Government issues Treasury Bills, and they are issued at a discount to face value, so statements 2 and 3 are both correct. See the full transcription at UPSC CSP 2018 GS Paper I, Q56.