ndian inan ial     ar et     11.5
              to obtain a specified credit rating from                    this money market instrument was
              an agency approved by the RBI (such as                      introduced/organised in 1992 to provide
              CRISIL, ICRA, etc).                                         short-term investment opportunity to
       (iv) Commercial Bill (CB): Organised in                            individuals. The initial guidelines for
              1990, a CB is issued by the All India                       the MF have been liberalised many
              Financial Institutions (AIFIs), Non-                        times. Since March 2000, MFs have
              Banking Finance Companies (NBFCs),                          been brought under the preview of SEBI,
              Scheduled           Commercial              Banks,          besides the RBI. At present, a whole lot
              Merchant Banks, Co-operative Banks                          of financial institutions and firms are
              and the Mutual Funds. It replaced the                       allowed to set up MFs, viz., commercial
              old Bill Market available since 1952 in                     banks, public and private financial
              the country.                                                institutions and private sector companies.
                                                                          At present 42 MFs are operating in the
        (v) Call Money Market (CMM): This is
                                                                          country—managing a corpus of over Rs.
              basically an inter-bank money market
                                                                          20.4 lakh crore (by March 2018).
              where funds are borrowed and lent,
              generally, for one day—that is why this               (vii) Repos and Reverse Repos: In the era of
              is also known as over-night borrowing                       economic reforms there developed two
              market (also called money at call). Fund                    new instruments of money market—
              can be borrowed/raised for a maximum                        repo and reverse repo. Considered the
              period upto 14 days (called short notice).                  most dynamic instruments of the Indian
              Borrowing in this market may take place                     money market they have emerged the
              against securities or without securities.11                 most favoured route to raise short-term
              Rate of interest in this market ‘glides’ with               funds in India. ‘Repo’ is basically an
              the ‘repo rate’ of the time the principle                   acronym of the rate of repurchase. The
              remains very simple—longer the period,                      RBI in a span of four years, introduced
              higher the interest rate. Depending upon                    these instruments—repo in December
              the availability and demand of fund in                      1992 and reverse repo in November
              this market the real call rate revolves                     1996.
              nearby the current repo rate.                                  Repo allows the banks and other
                 The scheduled commercial banks, co-                      financial institutions to borrow money
              operative banks operate in this market                      from the RBI for short-term (by selling
              as both the borrowers and lenders while                     government securities to the RBI). In
              LIC, GIC, Mutual Funds, IDBI and                            reverse repo, the banks and financial
              NABARD are allowed to operate as only                       institutions     purchase      government
                                                                          securities from the RBI (basically here the
              lenders in this market.
                                                                          RBI is borrowing from the banks and the
       (vi) Money Market Mutual Fund (MF):                                financial institutions). All government
              Popular as Mutual Funds (MFs)                               securities are dated and the interest for
      11.  The State Bank of India (operates in this market as            the repo or reverse repo transactions are
           lender as it is in a comforta le cash position lends           announced by the RBI from time to time.
           against government securities, while others lend against       The provision of repo and the reverse
           the deposit receipts of the orrowing an s. he S
           functions as the lender of intermediate resort while           repo have been able to serve the liquidity
           the      functions as the lender of last resort .              evenness in the economy as the banks