Money Market Instruments in India

The money market is where banks, companies and the government borrow and lend for short periods. RBI’s primer says these deals help fund trades in other markets. It adds that they help meet short-term liquidity mismatches. A liquidity mismatch means cash coming in and cash going out do not line up.

What does RBI say defines the money market?

RBI’s primer says the money market is, by definition, for a maximum tenor of one year. The primer is a question-and-answer page that RBI dated 2020. Every instrument in the table below falls inside that one-year limit, except where the card says otherwise.

How is that one year split?

• Overnight market: the tenor of a deal is one working day.
• Notice money market: the tenor of a deal is from 2 days to 14 days.
• Term money market: the tenor of a deal is from 15 days to one year.

Which instruments does RBI list?

RBI’s primer names call money, repos, T-Bills, Cash Management Bills, Commercial Paper, Certificate of Deposit and CBLO. The table below gives one fact about most of them.

What is call money?

RBI’s 2021 Directions define Call Money as borrowing or lending in unsecured funds on an overnight basis. Unsecured means no collateral backs the loan.

Picture two banks at closing time. One has spare cash and the other is short. The short bank borrows overnight and repays the next morning. This picture is an illustration, not a quoted case.

Who can take part?

RBI’s 2021 Directions list the eligible participants. The page shows an update as on 8 June 2023. The list names these groups.

• Scheduled commercial banks, excluding Local Area Banks, and payment banks.
• Small finance banks and regional rural banks.
• State, District Central and Urban Co-operative Banks, and primary dealers.

RBI’s primer, on a page dated 2020, named only scheduled commercial banks and primary dealers. The 2021 list is wider. Companies and retail investors are not on it.

What are notice and term money?

• Notice Money is borrowing or lending in unsecured funds for tenors up to and inclusive of 14 days, excluding overnight.
• Term Money is borrowing or lending in unsecured funds for periods over 14 days and up to one year.

Which rate matters here?

RBI’s June 2025 statement calls the weighted average call rate (WACR) the operating target of monetary policy. Card 7 shows the WACR figures from RBI’s October 2026 statement.

RBI released draft Directions for these markets in June 2026. Card 8 gives the details. A draft is not final.

What is a repo?

RBI’s primer calls a repo an instrument for borrowing funds. The borrower sells securities and agrees to repurchase them on a set future date. The price includes interest for the funds borrowed. So a repo is backed by securities, while call money is unsecured.

What is a tri-party repo?

RBI’s primer defines it as a repo with a third entity, the Tri-Party Agent. The agent sits between the borrower and the lender. It helps with collateral selection, payment and settlement, custody and management.

What is TREPS?

TREPS is the Tri-Party Repo Dealing System. CCIL’s page says CCIL is the central counterparty to all TREPS trades. CCIL also performs the role of Triparty Repo Agent.

• CCIL’s page lists public sector, private and foreign banks among the members.
• It also lists co-operative banks, insurance companies, mutual funds and primary dealers.
• NBFCs, corporates and provident or pension funds appear on the list too.
• The page names T+0 and T+1 as settlement types.

What happened to CBLO?

CBLO stands for Collateralized Borrowing and Lending Obligation. A mutual fund addendum dated 3 November 2018 says Tri-Party Repo came in place of CBLO. It gives 5 November 2018 as the effective date. That addendum is the only source for the date. No RBI or CCIL page was opened for it.

UPSC asked about CBLO in 2024. The official key gives option (c), the money market. RBI’s primer also lists CBLO among the money market instruments.

What is a treasury bill?

RBI’s primer defines a treasury bill, or T-bill, as a short-term debt instrument issued by the Government of India. It comes in three tenors: 91 day, 182 day and 364 day. T-bills are zero-coupon securities and pay no interest. They are issued at a discount and redeemed at face value.

What did the 7 October 2026 auction show?

RBI published the result on 7 October 2026. The table gives the notified amount and the cut-off price for each tenor.

Read the 91-day row. A bill of ₹100 face value sold at ₹98.6292. The investor gets ₹100 at maturity. The gap of ₹1.3708 is the investor’s return. That sum is arithmetic on RBI’s published price.

Who issues T-bills, and who runs the auctions?

RBI’s primer says the Central Government issues both treasury bills and dated securities. It says State Governments issue only dated securities, called State Development Loans.

The primer says RBI conducts auctions “usually every Wednesday”. Settlement is on T+1, the working day after the trade. RBI releases a quarterly calendar of T-bill issuances. The 7 October 2026 result was published on a Wednesday.

RBI manages the debt of the Centre. It may also manage a State’s public debt by agreement, under Section 21A(1)(b) of the RBI Act, 1934. The primer says it had such agreements with 29 State Governments and one Union Territory.

How do investors bid?

Bids can be competitive or non-competitive. A non-competitive bid is allotted at the weighted average yield or price that emerges in the auction. The primer says retail investors can bid non-competitively in select auctions. They bid through an aggregator or facilitator.

What are Cash Management Bills?

The Government introduced Cash Management Bills in 2010. They meet temporary gaps in its cash flow. They have the generic character of T-bills. The primer gives their tenors as generally under 91 days. The first set was issued on 12 May 2010.

What is commercial paper?

RBI’s Master Direction of 3 January 2024 defines Commercial Paper (CP). It is an unsecured money market instrument issued in the form of a promissory note. The Directions came into force on 1 April 2024.

• CP is issued in dematerialised form and held with a depository registered with SEBI.
• The minimum denomination is ₹5 lakh.
• The tenor is not less than seven days and not more than one year.
• The minimum credit rating is A3, on SEBI’s rating symbols.

Who can issue CP?

The Directions list the eligible issuers. They must have all fund-based facilities from banks, AIFIs and NBFCs classified as Standard at the time of issue.

• Companies, and NBFCs including Housing Finance Companies.
• InvITs and REITs, and All India Financial Institutions.
• Any other body corporate with a net worth of ₹100 crore. It must also be statutorily permitted to incur debt or issue debt instruments in India.
• Any other entity that RBI specifically permits.

Co-operative societies and LLPs with a net worth of ₹100 crore may also issue CP. So a statement that only companies can issue CP is wrong.

What is a certificate of deposit?

RBI’s 2021 Directions define a Certificate of Deposit (CD). It is a negotiable, unsecured money market instrument. A bank issues it as a Usance Promissory Note against funds deposited at the bank. The maturity is up to one year.

Under those Directions, CDs may be issued by scheduled commercial banks, regional rural banks and small finance banks. The tenor at issuance must not be less than seven days or more than one year. A CD is issued by a bank, not by RBI.

What about CDs from financial institutions?

The 2021 Directions say CDs issued by an All India Financial Institution follow a separate RBI Master Circular. That circular is dated 1 July 2015. It says such institutions can issue CDs for not less than 1 year and not more than 3 years. Later amendments to that circular were not checked.

How do CP and CD compare?

What about zero-coupon bonds?

RBI’s primer says zero-coupon bonds have no coupon payments. Like T-bills, they are issued at a discount and redeemed at face value. The Government of India issued them in 1996. The primer says it has not issued them since.

What is RBI Retail Direct?

An RBI release of October 2023 says the Prime Minister launched the Retail Direct Scheme on 12 November 2021. A PIB release of November 2021 says investors can open and keep a government securities account with RBI online, free of cost.

RBI’s August 2025 statement says the scheme lets retail investors buy G-Secs in primary auctions. They can also buy and sell G-Secs in the secondary market. As of October 2023, RBI said retail investors could buy Central Government Securities, T-bills, State Government Securities and Sovereign Gold Bonds on the portal.

What is auto-bidding?

RBI’s statement of 6 August 2025 says auto-bidding for T-bills has been enabled in Retail Direct. It covers both investment and re-investment. An investor can mandate automatic bids in primary T-bill auctions.

What is NDS-OM?

RBI’s primer says RBI introduced NDS-OM in August 2005. It is an anonymous, screen-based order matching module. CCIL operates it on behalf of RBI.

• Direct access is for select financial institutions, such as commercial banks and primary dealers.
• Other participants reach it through their custodians.
• RBI launched NDS-OM-Web on 29 June 2012. It lets gilt account holders take part through their primary members.

How do demat accounts fit in?

The primer says investors can also hold G-Secs in a demat account with a depository such as NSDL or CDSL. It says retail investors with demat accounts at these depositories can reach NDS-OM through primary members. So NDS-OM is a trading platform, while CDSL is a depository.

What does the CDSL trap ask?

UPSC’s 2021 question had a statement that CDSL is jointly promoted by RBI and the Bombay Stock Exchange. A SEBI release of August 1998 says CDSL is sponsored by The Stock Exchange, Mumbai (BSE) and Bank of India. It does not name RBI. Option (b) in UPSC’s key means statement 3 is not correct.

What did the MPC decide on 7 October 2026?

RBI’s statement of 7 October 2026 says the Monetary Policy Committee voted unanimously to raise the policy repo rate by 25 basis points. The new repo rate is 5.50%. The MPC also decided to change its stance to calibrated tightening. The resolution says two members, Dr. Nagesh Kumar and Prof. Ram Singh, wanted the stance kept at neutral.

The SDF rate is 25 bps below the repo rate. The MSF rate is 25 bps above it. Those gaps are arithmetic on RBI’s published rates.

What is the SDF?

RBI’s release of 8 April 2022 says the Standing Deposit Facility replaced the Fixed Rate Reverse Repo as the floor of the LAF corridor. The first SDF rate was 3.75%, which was 25 bps below the repo rate. Eligible participants could place deposits with RBI on an overnight basis. RBI kept the flexibility to absorb liquidity for longer tenors under the SDF.

What do conditions look like?

RBI’s statement of 7 October 2026 gives these figures.

• System liquidity had an average daily surplus of ₹5.9 lakh crore since the August 2026 meeting.
• The WACR largely traded in the lower half of the policy corridor in the recent period.
• The WACR averaged 14 basis points below the policy repo rate since the August policy.
• RBI will use a mix of liquidity tools and strive to align the WACR with the repo rate.
• The 3-month T-bill, CD and CP rates averaged 5.29%, 6.33% and 6.91% since the August policy.

What is the CRR?

On 6 June 2025, RBI announced a 100 basis point cut in the cash reserve ratio, to 3.0% of net demand and time liabilities (NDTL). The cut was to come in four equal tranches. The last tranche applied from the fortnight beginning 29 November 2025. RBI’s home page listed the CRR at 3.00% as at 8 October 2026.

The CRR is set as a share of NDTL. RBI’s October 2026 statement and resolution do not mention it.

Why does an active term money market matter?

RBI’s June 2026 release on draft Directions says an active term money market helps monetary policy transmission. It does so by linking the overnight money market and longer-term interest rates. The release gives no more detail on how that link works.

These items are dated. Check RBI’s site for anything after 8 October 2026.

Which dated items matter?

• 7 October 2026: the MPC raised the repo rate to 5.50%. Card 7 gives the other rates.
• 7 October 2026: RBI published T-bill auction results for 91, 182 and 364 days. Card 4 gives the prices.
• 8 October 2026: RBI announced a 10-day Variable Rate Reverse Repo auction for 9 October 2026. The notified amount is ₹1,50,000 crore, and the date of reversal is 19 October 2026.
• 25 June 2026: RBI released draft Call, Notice and Term Money Markets Directions, 2026. They aim to raise borrowing limits for standalone primary dealers and widen the participant base. Comments were invited by 17 July 2026.
• 6 August 2025: RBI’s statement says auto-bidding for T-bills has been enabled in Retail Direct.

What is the next MPC meeting?

RBI’s schedule lists 2, 3 and 4 December 2026. It then lists 3, 4 and 5 February 2027.

Which points should you keep straight?

• Call money participants: the 2021 Directions list more than banks and primary dealers, though not companies. The 2020 primer’s shorter list is the older wording.
• Commercial paper: the Directions list many issuers, not only companies, and the minimum rating is A3. UPSC 2020 asked about CP.
• Certificates of deposit: a bank issues them, not RBI, and bank CDs run up to one year. UPSC 2020 asked about CDs.
• CDs from financial institutions: they follow the 2015 Master Circular, which allows 1 to 3 years.
• Treasury bills: the Centre issues them, while State Governments issue dated securities. UPSC 2018 asked about this.
• Zero-coupon bonds: they pay no coupon, so they are not interest bearing. UPSC 2020 asked about this too.
• TREPS and call money: TREPS is a repo backed by securities, while call money is unsecured.
• Policy rates: the repo rate is 5.50% from 7 October 2026.

What did UPSC ask?

These are the UPSC prelims questions on this topic that were found for 2018, 2020, 2021 and 2024. Other years and other exams were not searched. Each stem was read from UPSC’s question paper and each key from UPSC’s key.

UPSC’s key gives (c), 2 and 3 only. Statement 1 is false because RBI may manage a State’s debt by agreement. The paper’s own text has the small slip “offer are”.

UPSC’s key gives (c), 1 and 3 only. Statement 2 is false. A bank issues a CD, not RBI, and a bank CD runs for up to one year. Statement 4 is false because zero-coupon bonds pay no coupon.

UPSC’s key gives (b), 1 and 2. Option (b) means statement 3 is not correct. Card 6 gives the SEBI release on CDSL.

UPSC’s key gives (c), the money market. The paper spells the name “Collateral Borrowing and Lending Obligations”. Card 3 gives RBI’s spelling, “Collateralized Borrowing and Lending Obligation”.

Also: RBI primer, RBI CP Direction, RBI CD Directions, RBI Master Circular 2015, RBI statement, Oct 2026.