The Building Blocks of India’s Money Market: Key Segments You Should Know 30Sep2025
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(b). Notice Money: Loans for periods from 2 days to 14 days.
The term 'capital funds' refers to the total of a bank's Tier 1 Capital (core capital) and Tier 2 Capital (supplementary capital).
3. Commercial Paper (CP) and non-convertible debenture or NCD (original maturity upto one year) – instruments with original maturity up to one year which can be issued by companies, including non-banking finance companies (NBFCs) and financial institutions.
4. Certificate of Deposit (CD) – a negotiable, unsecured money market instrument with original maturity up to one year which are issued by banks.
(The views expressed here are for information purposes only and should not be construed as a
recommendation or investment advice. While the author is a CFA Charterholder
with nearly 25 years of experience in financial markets, this content
is intended to share general insights and does not constitute financial
guidance. Please consult your financial
adviser before taking any investment decision. Safe to assume the author
has a vested
interest in stocks / investments discussed if any.)
Abbreviations used:
CD certificate of deposit
CP commercial paper
G-Sec government security
RBI Reserve Bank of India
TREP triparty repo or tri-party repo
Just as cells are the fundamental building blocks of life, creating the structure and function of all forms of life, the various segments of the money market are essential part of India's broader financial system.
While the money market itself may not always be in the spotlight like stocks or bonds, it plays a crucial role in short-term finance, helping banks, companies and the government manage liquidity effectively.
In India, the money market is made up of several segments, each designed to meet specific short-term liquidity needs. These building blocks help in the efficient functioning of the economy.
In this blog, we’ll explore these key segments – from call money to term money – and see how each one contributes to the stability and growth of India's financial landscape.
While the money market itself may not always be in the spotlight like stocks or bonds, it plays a crucial role in short-term finance, helping banks, companies and the government manage liquidity effectively.
In India, the money market is made up of several segments, each designed to meet specific short-term liquidity needs. These building blocks help in the efficient functioning of the economy.
In this blog, we’ll explore these key segments – from call money to term money – and see how each one contributes to the stability and growth of India's financial landscape.
Whether you're new to the world of finance or just curious, this guide will help you better understand the pivotal role played by the money market.
A. Primary segments of Money Market:
The money market is a sector of the financial market that deals with short-term borrowing and lending, typically in instruments with maturities of one year or less.
India's money market comprises:
1. Uncollateralised market (call money market)
2. Collateralised market (Triparty repo or TREP)
3. Commercial paper (CP)
4. Certificate of deposit (CD)
The categories are explained below:
1. The uncollateralised segment (call, notice and term money market):
Call / Notice / Term Money Market: This is primarily an interbank market for short-term unsecured lending and borrowing to meet liquidity requirements.
(a). Call Money: Loans for one working day (overnight).
(a). Call Money: Loans for one working day (overnight).
Call money means borrowing or lending in unsecured funds on overnight basis. Overnight transactions in India are referred to as call money.
The over-the-counter transactions in Call, Notice and Term Money Markets are reported by participants in an electronic trading platform called NDS - Call or Negotiated Dealing System - CALL, which is managed by Clearing Corporation of India Ltd (CCIL).
Participants do call money transactions directly on NDS-CALL platform also, in addition to over-the-counter (OTC).
NDS-CALL is a quote-driven system which was launched on 18Sep2006.
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See related:
Money Market Mutual Funds - An Introduction
(b). Notice Money: Loans for periods from 2 days to 14 days.
Notice Money means borrowing or lending in unsecured funds for tenors up to and inclusive of 14 days excluding overnight borrowing or lending
(c). Term Money: Loans for periods exceeding 14 days and up to one year.
Term Money means borrowing or lending in unsecured funds for periods exceeding 14 days and up to one year.
(c). Term Money: Loans for periods exceeding 14 days and up to one year.
Term Money means borrowing or lending in unsecured funds for periods exceeding 14 days and up to one year.
Participants eligible to participate in Call, Notice and Term Money Markets, both as borrowers and lenders, are:
> scheduled commercial banks or SCBs (excluding local area banks)
> payment banks
> small finance banks or SFBs
> regional rural banks or RRBs
> state cooperative banks, district central cooperative banks and urban cooperative banks
> primary dealers
These banks and primary dealers will have to follow prudential limits set by Reserve Bank of India (RBI) while participating in the Call, Notice and Term money market.
For example:
SCBs: Prudential limits are as approved by respective bank boards internally, but subject to inter-bank liabilities prescribed by RBI.
Payment banks and RRBs: In Call, Notice and Term money market: 100% of capital funds on a daily average basis in a reporting fortnight; and 125% of capital funds on any given day.
SFBs: In Call and Notice money market: 100% of capital funds on a daily average basis in a reporting fortnight; and 125% of capital funds on any given day. And in Term money market: As per internal board approved limits.
The term 'capital funds' refers to the total of a bank's Tier 1 Capital (core capital) and Tier 2 Capital (supplementary capital).
Why lend in the call money market without any colalteral security: Banks lend to each other in the call money market on an unsecured basis because the loans are very short-term (usually overnight) and the risk of non-repayment is minimal. The process relies on mutual trust, liquidity, and regulatory safeguards, making collateral unnecessary.
However, banks don’t lend to just anyone. They lend based on trust, relationships, financial stability and creditworthiness. Only reputable, stable banks have access to these loans, with regulatory oversight from the RBI ensuring safe liquidity management.
However, banks don’t lend to just anyone. They lend based on trust, relationships, financial stability and creditworthiness. Only reputable, stable banks have access to these loans, with regulatory oversight from the RBI ensuring safe liquidity management.
Other RBI norms:
Eligible participants are free to decide on interest rates in the Call, Notice and Term Money Markets.
Call, Notice and Term Money transactions shall be executed in Over-the-Counter markets, including on the NDS-CALL platform or any other Electronic Trading Platform authorised by the RBI.
The market timings for Call, Notice and Term Money transactions are from 9:00 AM to 7:00 PM on business days (effective 01Jul2025).
All Call, Notice or Term Money transactions, other than those executed on NDS-CALL platform, shall be reported to the NDS-CALL platform within 15 minutes of execution.
Call, Notice and Term Money transactions shall be executed in Over-the-Counter markets, including on the NDS-CALL platform or any other Electronic Trading Platform authorised by the RBI.
The market timings for Call, Notice and Term Money transactions are from 9:00 AM to 7:00 PM on business days (effective 01Jul2025).
All Call, Notice or Term Money transactions, other than those executed on NDS-CALL platform, shall be reported to the NDS-CALL platform within 15 minutes of execution.
2.
The collateralised segment (triparty repo, market repo and repo in
corporate bonds):
The transactions in the collateralised segment are dominated by Triparty Repos or TREPS.
While call money market is exclusive to banks and primary dealers, the participants in the uncollaterlised segment of the money market are: banks, primary dealers, mutual
funds, insurance companies and corporates.
Triparty repo means a repo contract where a third entity (apart from the borrower and lender), called a Triparty Agent, acts as an intermediary between the two parties to the repo to facilitate services like collateral selection, payment and settlement, custody and management during the life of the transaction.
A Triparty Repo (TREP) is a type of short-term loan transaction used in the financial markets, mainly for borrowing and lending money.
The term "repo" stands for repurchase agreement, which is a kind of loan where one party sells a security (like government bonds) to another party with an agreement to buy it back later, usually the next day or within a few days.
In a normal (bilateral) repo, the borrower and lender manage everything themselves. In a Triparty Repo (TREPS), a third, neutral entity steps in to act as a safeguard and manager. In India, the third pary is Clearing Corporation of India Ltd or CCIL.
The CCIL holds the collateral (Government Securities) in a safe account. It checks the quality and value of the collateral to ensure it's sufficient to cover the loan amount, removing the need for the lender to worry about this.
The actual borrower and lender do not have to know each other. The CCIL acts as a counterparty to both sides, which makes the trading process faster, anonymous and more efficient.
The CCIL guarantees the trade. If the borrower defaults (fails to pay back the loan), the CCIL steps in to make sure the lender still gets their money, typically by taking and selling the collateral. This dramatically reduces the credit risk for the lender.
In a bilateral repo, banks have to constantly monitor the value of the government securities or G-Secs collateral to ensure it remains sufficient to cover the loan (a process called Mark-to-Market and margin calls). The CCIL handles all of this automatically, applying haircuts and managing collateral substitutions, freeing up the banks' resources.
The CCIL handles all the back-office procedures: the transfer of G-Secs and the movement of funds, ensuring the transaction is settled securely and automatically.
TREPS allows borrowing banks to simply pledge a pool of eligible G-Secs with the CCIL. The CCIL then selects the most appropriate collateral for the transaction. This is a form of General Collateral (GC) funding, which is much more flexible than trading specific securities.
If a borrowing bank needs to swap out one G-Sec for another during the repo term, the CCIL handles the substitution without Bank A having to get involved.
For Mutual Funds, TREPS is the perfect tool to invest large sums of surplus cash for just one day. It's safe, gives a small return, and the cash is guaranteed to be back the next day to meet investor redemption (withdrawal) requests.
The lending side of TREPS market is dominated by mutual funds, which have nearly 60 per cent market share.
Triparty Repo (TREP) is like a short-term loan where you use valuable assets (like government bonds) as a guarantee. It's safe for both parties, thanks to the involvement of a trusted third party (the triparty agent).
In a normal (bilateral) repo, the borrower and lender manage everything themselves. In a Triparty Repo (TREPS), a third, neutral entity steps in to act as a safeguard and manager. In India, the third pary is Clearing Corporation of India Ltd or CCIL.
The CCIL holds the collateral (Government Securities) in a safe account. It checks the quality and value of the collateral to ensure it's sufficient to cover the loan amount, removing the need for the lender to worry about this.
The actual borrower and lender do not have to know each other. The CCIL acts as a counterparty to both sides, which makes the trading process faster, anonymous and more efficient.
The CCIL guarantees the trade. If the borrower defaults (fails to pay back the loan), the CCIL steps in to make sure the lender still gets their money, typically by taking and selling the collateral. This dramatically reduces the credit risk for the lender.
In a bilateral repo, banks have to constantly monitor the value of the government securities or G-Secs collateral to ensure it remains sufficient to cover the loan (a process called Mark-to-Market and margin calls). The CCIL handles all of this automatically, applying haircuts and managing collateral substitutions, freeing up the banks' resources.
The CCIL handles all the back-office procedures: the transfer of G-Secs and the movement of funds, ensuring the transaction is settled securely and automatically.
TREPS allows borrowing banks to simply pledge a pool of eligible G-Secs with the CCIL. The CCIL then selects the most appropriate collateral for the transaction. This is a form of General Collateral (GC) funding, which is much more flexible than trading specific securities.
If a borrowing bank needs to swap out one G-Sec for another during the repo term, the CCIL handles the substitution without Bank A having to get involved.
For Mutual Funds, TREPS is the perfect tool to invest large sums of surplus cash for just one day. It's safe, gives a small return, and the cash is guaranteed to be back the next day to meet investor redemption (withdrawal) requests.
The lending side of TREPS market is dominated by mutual funds, which have nearly 60 per cent market share.
Triparty Repo (TREP) is like a short-term loan where you use valuable assets (like government bonds) as a guarantee. It's safe for both parties, thanks to the involvement of a trusted third party (the triparty agent).
Collateralised Borrowing and Lending Obligation (CBLO) segment of the money market was discontinued and replaced with Triparty Repo from 05Nov2018. In Indian bond market parlance, Triparty Repos are known as TREPS.
3. Commercial Paper (CP) and non-convertible debenture or NCD (original maturity upto one year) – instruments with original maturity up to one year which can be issued by companies, including non-banking finance companies (NBFCs) and financial institutions.
Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. CPs are issued by commercial for corporate entities and their tenure shall be between seven days to one year.
4. Certificate of Deposit (CD) – a negotiable, unsecured money market instrument with original maturity up to one year which are issued by banks.
Certificate of Deposit (CD) is a negotiable money market instrument and issued in dematerialised form or as a Usance Promissory Note against funds deposited at a bank or other eligible financial institution for a specified time period.
5. Treasury Bills
ders:
liquid mutual funds
overnight mutual funds
money market mutual funds
(the blog is yet to be completed; please bear with me for another one or two hours by which I shall complete the same)
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References:
FBIL Financial Benchmarks India Pvt Ltd
RBI Financial Markets weblink
RBI Master Direction Call / notice / term money market updated 08Jun2023
RBI Repo Transactions updated 01Jan2025
RBI Commercial paper Master Direction 03Jan2024
RBI Certificate of Deposits Master Direction 04Jun2021
RBI Report of the Committee on MIBOR Benchmark 01Oct2024
SEBI Categorization and Rationalization of Mutual Funds
RBI Master Circular on Call / Notice money market operations 01Jul2009 - NDS Call platform
RBI Determinants of Uncollateralised Money Market Volumes 23Jul2025 - call money, TREP, primary dealers, mutual funds, government flows, USD-INR forward premia, etc.
Various tweets on TREPS / TREP
Tweet 26Ju2025 RBI new market timings wef 01Jul2025 for call money, market repo, TREP and others
CCIL Primer on TREPS or Triparty Repo Transactions
Tweet 31Jan2019 CBLO replaced by TREPs
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