11.6         ndian      onom
              are able to get the required amount of                        did not remain a discretionary route for
              funds out of it, and they can park surplus                    the government in meeting its short-term
              idle funds through it. These instruments                      requirements of funds at will (see ‘Fiscal
              have emerged as important tools in the                        Consolidation in India’, sub-topic in
              management of the monetary and credit                         Chapter 18 Public Finance for details).
              policy in recent years.12                                     CBM does not come under the similar
              Accepting the recommendations of                              WMAs provisions.
              the Urjit Patel Committee, the RBI
              in April 2014 (while announcing the                    Mutual Funds
              first Bi-monthly Credit & Monetary
                                                                  Of all investment options, mutual funds are
              Policy-2014–15) announced to introduce
                                                                  touted to be the best tool for wealth creation over
              term repo and term reverse repo. This is
                                                                  the long term. They are of several types, and the
              believed to bring in higher stability and
                                                                  risk varies with the kind of asset classes these funds
              better signalling of interest rates across
                                                                  invest in. As the name suggests, a mutual fund is a
              different loan markets in the economy.
                                                                  fund that is created when a large number of investors
      (viii) Cash Management Bill (CMB): The                      put in their money, and is managed by professionally
              Government of India, in consultation                qualified persons with experience in investing in
              with the RBI, decided to issue a new                different asset classes—shares, bonds, money market
              short-term instrument, known as                     instruments like call money, and other assets such
              Cash Management Bills, since August                 as gold and property. Their names usually give a
              2009 to meet the temporary cash flow                good idea about what type of asset class a fund,
              mismatches of the government. The                   also called a scheme, will invest in. For example,
              Cash Management Bills are non-standard              a diversified equity fund will invest in a large
              and discounted instruments issued for               number of stocks, while a gilt fund will invest
              maturities less than 91 days.                       in government securities, while a pharma fund
                 The CMBs have the generic character              will mainly invest in stocks of companies from the
              of Treasury Bills (issued at discount to the        pharmaceutical and related industries.
              face value); are tradable and qualify for                Mutual funds, first of all came in the money
              ready forward facility; investment in it is         market (regulated by the RBI), but they have the
              considered as an eligible investment in             freedom to operate in the capital market, too. This
              government securities by banks for SLR.             is why they have provision of dual regulator—the
              It should be noted here that the existing           RBI and SEBI. Mutual funds are compulsorily
              Treasury Bills serve the same purpose,              registered with the Securities and Exchange Board
              but as they were put under the WMAs                 of India (SEBI), which also acts as the first wall of
              (Ways & Means Advances) provisions by               defence for all investors in these funds. For those
              the Government of India in 1997, they               who do not understand how mutual funds operate
                                                                  but are willing to invest, the move by SEBI is seen
      12.   Reserve Bank of India, Report on Currency and
            Finance (New Delhi: Government of India, 1999);
                                                                  as a big relief.
            Reserve Bank of India, Report on Currency and Finance      Each mutual fund is run by a group of qualified
            (New Delhi: Government of India, 2000).
                                                                  people who form a company, called an asset