InterBank Participation Certificates IBPCs IBPC is yet another

Inter-Bank Participation Certificates (IBPCs): IBPC is yet another short term money market instrument whereby the banks can raise money/deploy short term surplus. In the case of IBPC the borrowing bank passes/sells on the loans and credit that it has in its book, for a temporary period, to the lending bank. IBPCs are of two types: They are: (i) With risk sharing, (ii) Without risk sharing, and Only Scheduled Commercial Banks can issue IBPCs. The various features of this instrument are given below: a. The minimum period shall be 91 days and maximum period 180 days in the case of IBPCs on risk sharing basis and in the case of IBPCs under non risk sharing basis the total period is limited to 90 days. b. Interest rates are determined between issuing bank and the participating bank. c. The issuing bank and the participating bank have to enter into participation contracts in the format prescribed. d. IBPCs are not transferable. e. IBPCs cannot be redeemed before due date. i. On the date of maturity the issuing Bank makes payment of the IBPC along with agreed rate of interest to the participat ing bank.

REPURCHASE AGREEMENT

ADVANTAGES OF REPOs The following are some of the important advantages that Repos can provide to the financial and debt markets of a country. 1. An active repo market leads to increase in the turnover of the money market. 2. It improves liquidity and depth of the money market. 3. It enables smooth adjustment of short term liquidity among varied categories of market participants. 4. Repo is a tool for funding transactions. It provides a cheaper and most efficient way of improving liquidity in the secondary markets. 5. Repos are a source of inexpensive finance for institutions. 6. Reserve Bank of India can use repos as a tool of open market operations for injecting or withdrawing liquidity from the market. 7. It can be used as indirect instruments of monetary control in the financial market.

MONEY MARKET MUTUAL FUNDS A money market mutual fund is an open ended scheme, which invests your money in ultra safe and high quality liquid instruments like treasury bills, commercial paper, certificates of deposits and repurchase agreements, with having less than one year of maturity time period. These mutual funds especially, the liquid fund invests your money in very short term market instruments with maturity up to 91 days where you can actually keep your money for very short periods of 1 3 months and this can serve as an emergency fund.

Types of MMMF There are two types of Money Market Mutual Funds namely Institutional Money Market Mutual Funds Retail Money Market Mutual Funds Institutional Money Market Mutual Funds are authorized by the governments, institutional investors and businesses etc. There is a huge sum of money deposited in the institutional money funds. Retail Money Market Mutual Funds are used for depositing money temporarily. The investment portfolio of money market funds incorporates treasury bills, short term debts, tax free bonds etc.