Money Market Instruments- Call, Market Repo and Tri-Party repo

Call Money and Notice Money

The call/notice money market forms an important segment of the Indian Money Market. Under call money market, funds are transacted on an overnight basis and under notice money market, funds are transacted for a period between 2 days and 14 days. This is an unsecured market where no security/ collateral is pledged. This is a bank dominated market. The deposits are payable on demand or maturity. It is a volatile market with high level of liquidity.

The importance of Call money market can be gauged from the fact that weighted average call rate (WACR) is the operating target of RBI’s monetary policy operations. Borrowing and lending in Call money can be made on NDS-Call platform of RBI. This platform is managed by CCIL.  A screenshot of CCIL website depicting Call money deals is provided below:

CCIL Trading
Screenshot of CCIL website- displaying trading of Call, TREP and Repo

Participants

Scheduled commercial banks (excluding RRBs), co-operative banks (other than Land Development Banks) and Primary Dealers (PDs), are permitted to participate in call/notice money market both as borrowers and lenders.

 Further reading

Triparty Repo and Market Repo (in G-sec and  corporate debt securities)

“Repo” means an instrument for borrowing funds by selling securities with an agreement to repurchase the securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed.

“Reverse repo” means an instrument for lending funds by purchasing securities with an agreement to resell the securities on a mutually agreed future date at an agreed price which includes interest for the funds lent.

Tri-party repo is a type of repo contract where a third entity (apart from the borrower and lender), called a Tri-Party 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.

Eligible collateral under repo, reverse repo and Triparty Repo in corporate debt securities

  • Government Securities
  • Listed corporate debt securities of original maturity of more than one year which are rated ‘AA’ or above by the rating agencies registered with SEBI.
  • Commercial Papers (CPs), Certificates of Deposit (CDs) and Non-Convertible Debentures (NCDs) of original maturity upto one year which are rated A2 or above by the rating agencies registered with SEBI.
  • Bonds which are rated ‘AA’ or above, by the rating agencies registered with SEBI or internationally recognised rating agencies, and which are issued by multilateral financial institutions like the World Bank Group (e.g., IBRD, IFC), the Asian Development Bank or the African Development Bank and other such entities notified by the RBI.

Eligible participants

Banks ( excluding RRBs and LABs), Primary Dealer , NBFCs, All-India Financial Institutions, namely, Exim Bank, NABARD, NHB and SIDBI, India Infrastructure Finance Company Limited, scheduled urban cooperative bank, Mutual funds, Insurance Company, Housing Finance company.

Further reading TPR

Further reading Market repo