Q.Explain the important instruments of the Indian money market.

Each money market instrument is shaped by exactly who needs to borrow, for how long, and against what kind of underlying transaction.

The Indian money market trades five main instruments:

1. Call money / Notice money — the shortest instrument: banks borrow and lend among themselves for a single day (call money) or up to fourteen days (notice money), mainly to meet reserve requirements or unexpected cash shortfalls. The call rate is a closely-watched, real-time indicator of banking-system liquidity.
2. Treasury Bills (T-Bills) — issued by the RBI on behalf of the Government of India for standard maturities of 91, 182, and 364 days, sold at a discount to face value through auctions and redeemed at par. Carrying a sovereign guarantee, T-Bills are virtually risk-free and highly liquid.
3. Commercial Paper (CP) — an unsecured promissory note issued at a discount by large, creditworthy companies (subject to a minimum credit rating) to raise short-term working-capital funds directly from investors, generally cheaper than a bank loan; maturities run from a few days up to one year.
4. Certificate of Deposit (CD) — a negotiable receipt issued by scheduled commercial banks and select financial institutions against funds deposited for a fixed period, typically up to one year for banks. Unlike an ordinary fixed deposit, a CD can be transferred before maturity.
5. Commercial Bills (Bills of Exchange) — arising directly from a genuine credit sale of goods: the seller (drawer) draws a bill on the buyer (drawee), who accepts it and promises payment after a fixed period (commonly up to 90 days); the seller can get immediate funds by getting the bill discounted with a bank before maturity.

Together, these instruments give banks, corporates, and the government several distinct, purpose-built ways to borrow and lend for periods under a year, each suited to a different combination of issuer, purpose, and risk appetite.

Listing only Treasury Bills and Commercial Paper and stopping there — a complete answer is expected to cover all five standard instruments, including call/notice money and Commercial Bills, which are just as central to the syllabus's treatment of the money market.