Chapter 30: Money Markets

📚 JAIIB 2025 • IE & IFS • Module D • Chapter 2 of 17

Money Markets — Short-Term Liquidity Engine

The fulcrum of monetary operations — Call/Notice/Term Money, Treasury Bills (91/182/364 day), Certificates of Deposit (₹5L min), Commercial Paper, Repo, Tri-Party Repo, Bill Rediscounting (BRDS), LTRO/TLTRO.

⏱ 18 min read🎯 High Exam Weightage🧠 8 Memory Tricks⚡ 12 Flash Cards

Banky Enters the Short-Term Money Shop! ⏱️

Money markets are where banks borrow and lend for hours, days, or weeks. Your bank’s treasury uses these instruments EVERY DAY. This chapter is treasury operations 101.

“Sir, my treasury manager talks about call money, TREPS, and T-bills all day. I smile and nod. But WHAT are these things?!” 😅
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Section 1 of 9

Why Read This Chapter?

Your bank’s treasury lives in the money market — understand it or stay at the counter forever

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Sir, I don’t work in treasury. Why study money market instruments?
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Banky, money markets affect YOUR branch every day! When your bank has excess cash → treasury lends it in call money market (earning overnight interest). When your bank is short of funds → treasury borrows via repo (pledging G-Secs to RBI). T-bill rates determine your bank’s investment returns. CD rates affect your FD pricing. Understanding money markets = understanding why your bank’s interest rates change and how your treasury earns/pays for liquidity!
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Exam Marks

4-6 questions — call (1 day) vs notice (2-14 days) vs term (>14 days to 1 year), T-bill types (91/182/364), CD minimum (₹5 lakh), T-bill minimum (₹10,000), LTRO max tenor (3 years). VERY high weightage!

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Career Growth

Money market knowledge = direct path to treasury department — the most prestigious posting in any bank

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Real Life

You’ll understand why overnight rates spike at quarter-end and why your bank offers special CD rates

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Section 2 of 9

How Will It Benefit You?

Real career advantages

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Give me a real scenario!
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⏱️ Scenario: Your treasury manager asks: ‘We have ₹100 crore surplus today. Where should we park it?’ You suggest: ‘Sir, if it’s overnight → call money or TREPS. If 7-14 days → notice money. If 91 days → T-bills at auction. If we want corporate exposure → buy CPs or CDs.’ Manager: ‘You think like a treasury officer!’ 🌟
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Section 3 of 9

What Is This Chapter About?

30-second summary

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Quick version, sir!
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This chapter covers: Call Money (1 day), Notice Money (2-14 days), Term Money (>14 days to 1 year) — uncollateralised interbank lending. Treasury Bills (91/182/364 days, Central Govt, minimum ₹10,000, discounted, T+1 settlement). CDs (7 days to 1 year, min ₹5 lakh, by scheduled banks/AIFIs, discounted). Commercial Paper (corporate short-term borrowing). Repo/Reverse Repo (collateralised lending against G-Secs). Tri-Party Repo (CCIL/NSE as agents, Aug 2017). BRDS (bill rediscounting, 15-90 days). LTRO (1-3 year repos at policy rate, Feb 2020). TLTRO (targeted for corporate bonds/NBFCs).
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Section 4 of 9

Key Definitions — Banky Asks, Mentor Explains

Every term explained like you’re 10

Critical Term
Call, Notice & Term Money
Call = 1 day, Notice = 2-14 days, Term = >14 days to 1 year — interbank lending
Duration-based

Banky’s Understanding: Call Money: lending/borrowing for 1 day (overnight). Notice Money: 2 to 14 days. Term Money: exceeding 14 days up to 1 year. All are uncollateralised (no security pledged). Participants: banks + Primary Dealers (can borrow AND lend). Non-bank institutions (insurance, MFs) can only LEND. Trading on NDS Call system (electronic). Settlement via RTGS. Borrowing limits: SCBs = 100% of capital funds (daily avg) / 125% on any day.

🧒 Analogy: Like borrowing your roommate’s charger — call = for today only. Notice = for a few days. Term = for weeks. No security deposit needed between roommates (banks)!
Critical Term
Treasury Bills
Government’s short-term IOUs — 91, 182, 364 days — discounted instruments
91/182/364

Banky’s Understanding: Money market instruments for financing Central Government’s short-term debt. Three types: 91-day, 182-day, 364-day. Issued at discount to face value (₹100), redeemed at par. Minimum: ₹10,000 and multiples of ₹10,000. Settlement: T+1. Auction: competitive + non-competitive bidding on RBI’s E-Kuber. Retail investors: max 5% of notified amount (via RBI Retail Direct portal). Issued by Central Government only (NOT state, NOT corporate!).

🧒 Analogy: Like a government discount coupon — you buy it for ₹97 today and the government gives you ₹100 after 91 days. The ₹3 difference is your return!
Critical Term
Certificates of Deposit
Bank-issued negotiable money market instrument — minimum ₹5 lakh
₹5L min

Banky’s Understanding: Negotiable, issued in dematerialised form by scheduled commercial banks (including RRBs, SFBs) and select AIFIs. Minimum: ₹5 lakh (multiples of ₹5 lakh). Tenor: 7 days to 1 year (banks), 1-3 years (AIFIs). Issued at discount, redeemed at par. Can be issued to individuals, corporates, NRIs, trusts, MFs, insurance. Banks cannot grant loans against CDs unless permitted by RBI. No minimum net worth required for corporates to issue CDs.

🧒 Analogy: Like a premium FD that you can sell to someone else — it’s negotiable (transferable) and comes in minimum ₹5 lakh packs!
Critical Term
Commercial Paper
Corporate short-term borrowing — unsecured promissory notes
Corporate IOUs

Banky’s Understanding: Short-term unsecured promissory notes issued by corporates to raise working capital. An alternative to bank borrowing. Issued at discount. Tenor: typically 15 days to 1 year. Provides liquidity to the corporate sector (unlike call money which serves banks). Must have credit rating. Regulated by RBI.

🧒 Analogy: Like a corporate IOU — ‘I’ll pay you back in 3 months with interest.’ It’s the company’s promise to pay, backed by its reputation (credit rating), not collateral!
Critical Term
Repo & Reverse Repo
Repo = borrow by selling securities (buy back later). Reverse Repo = lend by buying securities.
Collateralised

Banky’s Understanding: Repo (Repurchase Agreement): borrower sells securities to lender with agreement to buy back at a higher price. The difference = interest. Used by banks to borrow from RBI by pledging G-Secs. Reverse Repo: opposite — lender buys securities (parks excess liquidity with RBI). Now replaced by SDF (Standing Deposit Facility) as LAF floor. Repo rate = policy rate (centre of LAF corridor).

🧒 Analogy: Repo = pawning your gold watch to get cash (and buying it back tomorrow with interest). Reverse Repo = giving cash and holding someone’s watch overnight (earning interest)!
Critical Term
Tri-Party Repo (TREPS)
Repo with a third-party agent (CCIL/NSE) managing collateral
Aug 2017

Banky’s Understanding: Introduced August 2017. A third entity (tri-party agent) manages collateral selection, payment, settlement, and custody. Agents: CCIL and NSE. Agent doesn’t participate in risk — if default occurs, impact falls on defaulting party. Replaced CBLO (phased out November 2018). Minimum paid-up capital for agents: ₹25 crore. Designed to improve corporate bond repo market liquidity. Agent needs 5+ years financial sector experience.

🧒 Analogy: Like hiring a lawyer to handle a property deal between buyer and seller — the tri-party agent manages the paperwork (collateral) but isn’t responsible if either party defaults!
Critical Term
BRDS — Bill Rediscounting
Banks rediscount trade bills they’ve already discounted — tenor 15-90 days
15-90 days

Banky’s Understanding: Bill Rediscounting Scheme — banks rediscount genuine trade bills arising from goods/services supply. Bank issues Derivative Usance Promissory Note (DUPN) backed by unencumbered usance bills. Minimum tenor: 15 days, maximum: 90 days. Bills must be from bona fide trade transactions (NOT house bills, NOT finance company bills). Interest: front-ended, actual/365 basis. Promotes bills culture in the economy.

🧒 Analogy: Like selling a post-dated cheque you received from a customer to another bank — you get cash now, the other bank collects later!
Critical Term
LTRO & TLTRO
Long-term repos (1-3 years) at policy rate — TLTRO targets specific sectors
Feb 2020

Banky’s Understanding: LTRO (Long-Term Repo Operations): introduced February 2020. Term repos of 1-year and 3-year tenor at policy repo rate. Total amount: up to ₹1,00,000 crore. Dual objectives: encourage maturity transformation + assure durable liquidity. Conducted on E-Kuber platform. Minimum bid: ₹1 crore. TLTRO (Targeted LTRO): same but targeted — funds must go to corporate bonds, CPs, NCDs (TLTRO 1.0) or NBFCs/MFIs (TLTRO 2.0). 50% from primary + 50% from secondary market. Max tenor: 3 years.

🧒 Analogy: LTRO = RBI giving banks a 3-year loan at cheap rates. TLTRO = same but with conditions: ‘use this money specifically for corporate bonds or NBFCs, not anything else!’
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Section 5 of 9

Chapter Explained in Simple Stories

So easy even Banky’s nephew understands

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Sir, explain this like a story!
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Three bite-sized stories coming up — impossible to forget! 🚀

⏱️ Block 1: Call, Notice, Term — The Time Spectrum

Money market lending by TIME:

📞 Call Money (1 day): Overnight. Banks lend surplus to banks needing cash. No collateral. Settled via RTGS.

📋 Notice Money (2-14 days): Short notice lending. Max boundary = 14 days (exam favourite!). Still uncollateralised.

📅 Term Money (>14 days to 1 year): Longer duration. Board-approved limits. Still interbank.

Who plays? Banks + PDs = borrow AND lend. Insurance/MFs = LEND only. All on NDS Call system. SCB limit: 100% capital funds (daily avg), 125% on any day.

Key Term
14 Days Boundary
Notice money max = 14 days. NOT 7, NOT 30. Beyond 14 days = Term Money. This boundary is tested in almost every JAIIB exam!
🧑‍💼 Banky: “Call=1day, Notice=max 14 days, Term=beyond 14 days. Time is the only difference! ⏱️”

📜 Block 2: T-Bills, CDs, CPs — Three Borrowers, Three Instruments

Three key money market instruments, each for a different borrower:

📜 T-Bills (Government): 91/182/364 days. Min ₹10,000. Central Govt only. Discounted. Auction on E-Kuber. T+1 settlement. Retail: 5% via RBI Retail Direct.

💳 CDs (Banks): 7 days to 1 year. Min ₹5 LAKH. By scheduled banks + AIFIs. Dematerialised. Discounted. No loans against CDs!

📄 CPs (Corporates): Unsecured promissory notes. Must have credit rating. Alternative to bank borrowing. Provides corporate liquidity.

GBC Rule: G=Govt=T-Bills, B=Banks=CDs, C=Corporates=CPs!

Key Term
₹10K vs ₹5L
T-Bill minimum = ₹10,000. CD minimum = ₹5,00,000 (₹5 lakh). Very different scales! T-Bills are accessible to retail; CDs are for institutional players.
🧑‍💼 Banky: “GBC = Govt→T-Bills, Banks→CDs, Corps→CPs. Three borrowers, three instruments, one money market! 📜💳📄”

🔄 Block 3: Repos, TREPS & Long-Term Operations

🔄 Repo: Bank pledges G-Secs to RBI → gets cash → buys back later. Repo rate = policy rate.

🔄 TREPS (Aug 2017): Tri-party repo with CCIL/NSE as agents managing collateral. Replaced CBLO (Nov 2018). Agent min: ₹25 Cr capital, 5+ years experience.

📄 BRDS: Banks rediscount trade bills. 15-90 days. DUPN instrument. Only bona fide trade bills.

📅 LTRO (Feb 2020): 1-3 year repos at policy rate. ₹1 lakh crore total. On E-Kuber. Min bid: ₹1 Cr.

📅 TLTRO: Targeted LTRO for corporate bonds/NBFCs. 50% primary + 50% secondary. Max 3 years.

Key Term
LTRO Max = 3 Years
LTRO maximum tenor = 3 years. NOT 1 year, NOT 5 years, NOT 10 years. This is the most frequently tested LTRO question!
🧑‍💼 Banky: “Repo=pledge G-Secs, TREPS=with CCIL agent, LTRO=3yr cheap loan from RBI. The plumbing that keeps banks liquid! 🔧”
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Section 6 of 9

Exam Angle — Every Testable Point

All facts, numbers, definitions JAIIB tests

✅ Must-Know Facts — Highest Probability

  • Money market: short-term funds — overnight to 1 year — fulcrum of monetary operations
  • 3 functions: equilibrating demand-supply, efficient price clearing, central bank intervention avenue
  • Call money = 1 day (overnight) | Notice money = 2-14 days | Term money = >14 days to 1 year
  • Call/Notice/Term: UNCOLLATERALISED | Banks+PDs can borrow AND lend | Insurance/MFs = lend ONLY
  • Notice money max = 14 DAYS (not 7, not 30) — exam boundary question!
  • SCB borrowing limit: 100% capital funds (daily avg) / 125% on any day
  • Trading on NDS Call system (electronic) | Settlement via RTGS
  • Treasury Bills: 91/182/364 days | Issued by CENTRAL GOVERNMENT only | Min ₹10,000
  • T-Bills: discounted instruments (buy below par, redeem at par) | Settlement T+1
  • T-Bill auction: competitive + non-competitive on E-Kuber | Retail: 5% via RBI Retail Direct
  • CDs: min ₹5 LAKH (multiples of ₹5L) | 7 days to 1 year (banks) | Dematerialised | Discounted
  • CDs issued by: scheduled commercial banks (incl RRBs, SFBs) + select AIFIs
  • No minimum net worth required for corporates to issue CDs — exam trick!
  • Banks CANNOT grant loans against CDs (unless RBI permits)
  • Commercial Paper: corporate unsecured promissory notes — must have credit rating
  • Tri-Party Repo (TREPS): introduced August 2017 | Agents: CCIL, NSE | Min capital ₹25 Cr
  • CBLO phased out November 2018 — replaced by TREPS
  • BRDS: Bill Rediscounting — 15 to 90 days | DUPN | Bona fide trade bills only
  • LTRO: introduced February 2020 | 1-year and 3-year tenor | At policy repo rate | ₹1 lakh crore
  • TLTRO: targeted for corporate bonds/NBFCs | Max 3 years | 50% primary + 50% secondary
  • LTRO maximum tenor: 3 years (not 1, not 5, not 10) — exam question!

📝 Previous Year Questions

Q: Maximum period for notice money:
A: (c) 14 days ✅ (NOT 7 days!)
Q: Issuing authority of Treasury Bills:
A: (b) Central Government ✅ (NOT state, NOT AIFI!)
Q: Min net worth for corporate to issue CD:
A: (d) No minimum net worth requirement ✅
Q: Maximum tenor for LTRO:
A: (b) 3 years ✅ (NOT 1, NOT 5!)
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Section 7 of 9

Memory Tricks That STICK

Lock every fact permanently

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Too many facts! Help! 🤯
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These tricks will lock everything in forever! 🧲

🧠 Trick 1 — Call-Notice-Term

1 day / 2-14 / >14 to 1 year
CALL = 1 day (quick call!) NOTICE = 2 to 14 days (give notice!) TERM = beyond 14 days (longer term!)
Call = overnight (1 day). Notice = 2-14 days (you give notice of duration). Term = >14 days to 1 year. All uncollateralised between banks/PDs. Notice max = 14 days is the KEY exam boundary!

🧠 Trick 2 — T-Bill Trio

91, 182, 364 days
T-Bills = 91, 182, 364 (roughly 3, 6, 12 months) Central Govt | Min ₹10,000 Discounted | T+1 settlement
Three types: 91-day (~3 months), 182-day (~6 months), 364-day (~1 year). ALL issued by Central Government. Min ₹10,000. Buy at discount, redeem at ₹100 par.

🧠 Trick 3 — CD Minimum ₹5 Lakh

Not ₹1 lakh, not ₹10 lakh
CD = Certificate of Deposit Min = ₹5 LAKH (FIVE!) Multiples of ₹5L thereafter (T-Bill = ₹10K, CD = ₹5L)
CD minimum = ₹5 lakh. T-Bill minimum = ₹10,000. Very different! CDs are for bigger players (₹5L+). T-Bills are accessible to retail (₹10K). Both are discounted instruments.

🧠 Trick 4 — No Loans Against CDs

Banks cannot lend against CDs
CDs = Cannot Deliver loans against! Unless RBI specifically permits (rare exception)
Banks CANNOT grant loans against CDs unless RBI specifically permits. This is because CDs are already a bank liability — lending against them creates circular risk.

🧠 Trick 5 — TREPS Replaced CBLO

August 2017 (TREPS) → November 2018 (CBLO phased out)
TREPS = TRI-Party REPo System CBLO = OLD (phased out Nov 2018) Agents: CCIL + NSE | ₹25 Cr capital
TREPS introduced Aug 2017. CBLO phased out Nov 2018. All CBLO members migrated to TREPS. Agents: CCIL and NSE. Tri-party agent manages collateral but bears no risk.

🧠 Trick 6 — LTRO = 3 Years Max

February 2020, ₹1 lakh crore
LTRO = Long-Term = 3 years MAX Feb 2020 | At repo rate ₹1 lakh crore total | E-Kuber
LTRO max tenor = 3 years (NOT 1, NOT 5, NOT 10). Introduced Feb 2020. At policy repo rate. Total ₹1 lakh crore. Min bid ₹1 crore. On E-Kuber platform.

🧠 Trick 7 — BRDS Boundaries

15-90 days, trade bills only
BRDS = 15 to 90 days (FIFteen to NINEty) Only TRADE bills — no house bills! DUPN = Derivative Usance PN
BRDS tenor: minimum 15 days, maximum 90 days. Only genuine trade bills (bona fide). No house bills, no finance company bills. Uses DUPN backed by unencumbered usance bills.

🧠 Trick 8 — T-Bill vs CD Issuer

T-Bill = Govt, CD = Bank
T-Bill = Government borrows CD = Bank borrows CP = Corporate borrows (G-B-C = Govt, Bank, Corporate!)
Three borrowers in money market: Government (T-Bills), Banks (CDs), Corporates (CPs). Each has its own instrument. GBC = who’s borrowing determines the instrument!
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Section 8 of 9

Visual Summary — Chapter Map

Entire chapter in one diagram

Money Markets — Chapter 30 MapShort-term funds: Overnight to 1 Year📞 CALL (1 day)Overnight | UncollateralisedBanks+PDs borrow/lend📋 NOTICE (2-14d)Max 14 days! NOT 7!Uncollateralised📅 TERM (>14d-1yr)Beyond 14 daysBoard-approved limits🔄 REPO/TREPSCollateralised (G-Secs)TREPS Aug 2017 | CCIL/NSE📜 T-BILLS (Govt borrows)91/182/364 days | Min ₹10,000Discounted | T+1 | E-Kuber auction💳 CDs (Banks borrow)Min ₹5 LAKH | 7d-1yr | DematNo loans against CDs!📄 CPs (Corps borrow)Unsecured promissory notesCredit rated | Corp liquidity📅 BRDS (15-90d, trade bills) | LTRO (1-3yr, ₹1L Cr, Feb 2020) | TLTRO (corporate bonds/NBFCs)⚠️ Notice max=14d | T-Bill issuer=Central Govt | CD min=₹5L | LTRO max=3yr | No net worth for CD issuancebankerbro.com/ • JAIIB IE&IFS Chapter 30 • Module D
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Section 9 of 9

Flash Revision — Last-Minute Cards

Read these 10 minutes before exam

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EXAM IN 15 MINUTES! 😰
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12 cards — read twice, you’ll get every question right! 💪
Call Money
1 day (overnight) — uncollateralised
Banks+PDs borrow & lend | Insurance/MFs lend only
Notice Money
2 to 14 days — NOT 7, NOT 30!
14 days is the MAX boundary — exam favourite!
Term Money
>14 days to 1 year
Uncollateralised | Board-approved limits
Treasury Bills
91/182/364 days | Central Govt | Min ₹10,000
Discounted | T+1 settlement | E-Kuber auction
CDs
Min ₹5 LAKH | 7 days to 1 year (banks)
Dematerialised | Discounted | No loans against CDs!
Commercial Paper
Corporate unsecured promissory notes
Must have credit rating | Alternative to bank borrowing
Repo
Borrow by selling G-Secs (buy back later)
Repo rate = policy rate = centre of LAF corridor
TREPS
Tri-Party Repo — CCIL/NSE as agents
Aug 2017 | Replaced CBLO (Nov 2018) | ₹25Cr min capital
BRDS
Bill Rediscounting — 15 to 90 days
DUPN | Trade bills only (no house/finance bills)
LTRO
1-3 year repos at policy rate — Feb 2020
₹1 lakh crore total | E-Kuber | Min bid ₹1 Cr
TLTRO
Targeted LTRO for corporate bonds/NBFCs
50% primary + 50% secondary | Max 3 years
GBC Rule
Govt=T-Bills | Banks=CDs | Corporates=CPs
Three borrowers, three instruments — who borrows determines what!

⚡ Chapter 30 Complete — Money Markets

  • Money market: short-term (overnight to 1 year) — fulcrum of monetary operations
  • Call=1 day | Notice=2-14 days | Term=>14 days to 1 year — all uncollateralised
  • T-Bills: 91/182/364 days | Central Govt | Min ₹10,000 | Discounted | T+1 | E-Kuber
  • CDs: Min ₹5 LAKH | 7 days-1 year | Banks/AIFIs | No loans against CDs!
  • CPs: Corporate unsecured notes | Credit rated | Alternative to bank borrowing
  • Repo = borrow via G-Secs | TREPS: tri-party (CCIL/NSE, Aug 2017, replaced CBLO)
  • BRDS: 15-90 days, trade bills, DUPN | LTRO: 1-3 years at repo rate (Feb 2020, ₹1L Cr)
  • GBC: Govt=T-Bills, Banks=CDs, Corporates=CPs — three borrowers, three instruments!
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Banky says: “Call=1day, Notice=14days max, T-Bills=₹10K, CDs=₹5L, LTRO=3years — money market mastered!” 🎉⏱️

You now know every money market instrument — from overnight call money to 3-year LTROs. When your treasury manager talks about TREPS and T-bill auctions, you’ll follow every word! 💪

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