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.
Non-Convertible Debenture (NCD) means a secured money market instrument with an original or initial maturity upto one year.
Let us see how a CP works in practice:
A large corporation, say, Larsen & Toubro Ltd, needs money for short term operational expenses. A CP allows L&T to raise the necessary funds without going through traditional bank loans.
RBI has separate guidelines for CDs issued by the All India Financial Institutions (AIFIs).
Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 day, 182 day and 364 day.
Treasury bills are zero coupon securities and pay no interest. Instead, they are issued at a discount and redeemed at the face value at maturity.
The definition of these categories of mutual funds are as per SEBI Categorization of Rationalization of mutual funds.
(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
FEMA Foreign Exchange Management Act (FEMA), 1999
NCD non convertible debenture
RBI Reserve Bank of India
SEBI Securities and Exchange Board 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.
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)
5. Treasury Bills or T-Bills
The categories are explained below:
1. The uncollateralised segment (Call, Notice and Term money market):
Call / Notice / Term Money Market: This is primarily an inter-bank 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 the 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:
RBI's LAF Corridor Simplified: SDF, MSF & All That Jazz
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.
As stated above, call money transactions are done without any collateral based on mutual trust and creditworthiness among banks and primary dealers.
But in the collateralised part of the money market, borrowing entities need to offer security to lenders -- as such, this is called collateralised market. This is secured lending.
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 market 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 borrowing bank 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 market 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 borrowing bank 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 or corporate entities and their tenure shall be between seven days to one year.
Non-Convertible Debenture (NCD) means a secured money market instrument with an original or initial maturity upto one year.
The following entities are eligible to issue CPs and NCDs:
> companies
> non-banking financial companies or NBFCs, including HFCs or housing finance companies
> InvITs or infrastructure investments trusts
> REITs or real estate investment trusts
> AIFIs or all-India financial institutions, like, Exim Bank, NABARD, ECGC and NHB
> any other body corporate with a minimum networth of Rs 100 crore
> any other entity as permitted by RBI
> co-operative societies and limited liability partnerships with a minimum networth of Rs 100 crore, subject to certain conditions
Eligible investors in CPs and NCDs are:
> All residents are eligible to invest in CPs and NCDs
> Non-residents are eligible to invest in CPs and NCDs to the extent permitted as per FEMA
> Non-residents are eligible to invest in CPs and NCDs to the extent permitted as per FEMA
Other RBI norms:
CPs and NCDs shall be issued in dematerialised form and held with a depository registered with SEBI.
CPs and NCDs shall be issued in minimum denomination of Rs 5 lakh and in multiples of Rs 5 lakh thereafter.
CPs and NCDs shall be issued in minimum denomination of Rs 5 lakh and in multiples of Rs 5 lakh thereafter.
CPs shall not be issued for a period of less than seven days or more than one year. And NCDs shall not be issued for a period of less than ninety days or more than one year.
Issuing CP/NCDs with call / put options is not allowed.
Issuing CP/NCDs with call / put options is not allowed.
The minimum credit rating for the issuance of CPs and NCDs shall be ‘A3’ as per rating symbol and definition prescribed by SEBI.
Let us see how a CP works in practice:
A large corporation, say, Larsen & Toubro Ltd, needs money for short term operational expenses. A CP allows L&T to raise the necessary funds without going through traditional bank loans.
So, L&T can raise money from the market by issuing a CP for say, 50 days. As its credit standing is high in the market, it's possible for L&T to raise money easily without offering any collateral obligation.
CPs offer corporates a cost-effective alternative to borrowing from banks. Investors, such as mutual funds, often invest in CPs as they offer relatively high returns with short-term liquidity.
CPs offer corporates a cost-effective alternative to borrowing from banks. Investors, such as mutual funds, often invest in CPs as they offer relatively high returns with short-term liquidity.
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.
Entities eligible to issue CDs are:
> Scheduled Commercial Banks
> Regional Rural Banks
> Small Finance Banks.
> Regional Rural Banks
> Small Finance Banks.
RBI has separate guidelines for CDs issued by the All India Financial Institutions (AIFIs).
Eligible investors in CDs are:
> all persons resident in India
> all persons resident in India
Other RBI guidelines:
CDs shall be issued only in dematerialised form and held with a depository registered with SEBI.
CDs shall be issued in minimum denomination of Rs 5 lakh and in multiples of Rs 5 lakh thereafter.
CDs shall not be issued for a period of less than seven days or more than one year.
Banks are not allowed to grant loans against CDs, unless specifically permitted by RBI.
Example:
A bank, say, Axis Bank, looking to meet its short-term liquidity needs may issue a CD to high networth individuals, corporates or mutual funds for a fixed period, say, 100 days, typically offering a higher interest rate than regular fixed deposit accounts.
CDs provide banks with an alternative way of raising short-term capital, while also offering investors a relatively safe investment option with a fixed return.
A bank, say, Axis Bank, looking to meet its short-term liquidity needs may issue a CD to high networth individuals, corporates or mutual funds for a fixed period, say, 100 days, typically offering a higher interest rate than regular fixed deposit accounts.
CDs provide banks with an alternative way of raising short-term capital, while also offering investors a relatively safe investment option with a fixed return.
5. Treasury Bills Market: This market deals with short-term borrowing by the central government or Government of India.
Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 day, 182 day and 364 day.
Treasury bills are zero coupon securities and pay no interest. Instead, they are issued at a discount and redeemed at the face value at maturity.
For example, a 91 day Treasury bill of Rs 100/- (face value) may be issued at say Rs 98.20, that is, at a discount of say, Rs 1.80 and would be redeemed at the face value of Rs 100.
The return to the investors is the difference between the maturity value or the face value (that is Rs 100) and the issue price.
The return to the investors is the difference between the maturity value or the face value (that is Rs 100) and the issue price.
T-Bills are considered virtually risk-free and are an integral part of India's money market.
RBI issues them, on behalf of central government, to meet the short term liquidity needs of the government.
Money market instruments in India include:
Call or notice money,
TREPs or Triparty repos,
TREPs or Triparty repos,
Repo or Reverse Repo,
CPs,
Non-Convertible Debentures (NCDs) of original or initial maturity up to one year,
CDs,
Cash Management Bills
Treasury Bills,
CPs,
Non-Convertible Debentures (NCDs) of original or initial maturity up to one year,
CDs,
Cash Management Bills
Treasury Bills,
Mutual fund units,
Floating Rate Bonds or FRBs issued by Govt of India,
Government securities having an unexpired maturity up to one year, and
Usance bills.
Government securities having an unexpired maturity up to one year, and
Usance bills.
Money market mutual funds in India typically invest in the above mentioned money market papers.
Investment Implications for Investors
Retail / high net worth investors can invest in CPs, NCDs and CDs directly.
The primary channel for retail investors to invest directly in Treasury Bills is the RBI Retail Direct Scheme. Launched by RBI, this platform allows individual investors to directly open and maintain a Retail Direct Gilt (RDG) Account with the RBI.
One can also invest in T Bills indirectly or with the help of intermediaries through:
> Banks, Primary Dealers or Brokerage houses
> Gilt mutual funds, which invest predominantly in government securities.
One can also invest in T Bills indirectly or with the help of intermediaries through:
> Banks, Primary Dealers or Brokerage houses
> Gilt mutual funds, which invest predominantly in government securities.
Relatively safer and easily accessible are mutual funds:
If you have surplus money for investment for less than a year, you can invest in the following types of mutual funds to park your short term money:
Overnight Funds: They invest in overnight securities having maturity of one day.
Liquid Funds: They invest in debt & money market instruments with maturity of upto 91 days only.
Ultra Short Duration Funds: They invest in debt and money market papers with portfolio Macaulay Duration of between three and six months.
Low Duration Funds: They invest in debt and money market papers with portfolio Macaulay Duration of between six and 12 months.
Money Market Funds: They invest in money market instruments having maturity of upto one year.
Liquid Funds: They invest in debt & money market instruments with maturity of upto 91 days only.
Ultra Short Duration Funds: They invest in debt and money market papers with portfolio Macaulay Duration of between three and six months.
Low Duration Funds: They invest in debt and money market papers with portfolio Macaulay Duration of between six and 12 months.
Money Market Funds: They invest in money market instruments having maturity of upto one year.
The definition of these categories of mutual funds are as per SEBI Categorization of Rationalization of mutual funds.
Retail investors can use money market instruments as a safe, short-term investment to earn better returns than traditional savings accounts or fixed deposits. While direct access to some instruments like call money and TREPs is not available to retail investors, mutual funds and liquid funds offer a simple and effective way to participate in the money market, ensuring high liquidity and low risk.
If you're looking for a short-term, safe place to invest, debt mutual funds which invest in instruments with maturity of less than one year are a great option, providing easy access to otherwise restricted instruments.
If you're looking for a short-term, safe place to invest, debt mutual funds which invest in instruments with maturity of less than one year are a great option, providing easy access to otherwise restricted instruments.
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References:
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.
RBI Financial Markets overview, including money market and forex market
CCIL TR F-TRAC Platform for tracking trades on CDs, CPs, 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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Disclosure: I've got a vested interest in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.
Disclaimer: The analysis and
opinion provided here are only for information purposes and should not be construed
as investment advice. Investors should consult their own financial advisers
before making any investments. The author is a CFA Charterholder with a vested
interest in financial markets.
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