Top 10 – Features of Money Market Instruments

Features of Money Market Instruments-What are Money Market Instruments Features-What are the Main Features of a Money Market Instruments

Money market instruments can help businesses, organizations, and government agencies get the short-term loan capital they need. Borrowers get the money they need to cover short-term expenses at a reasonable rate, and lenders get interest income and more cash flow. Bonds, treasury bills, certificates of deposit (CDs), commercial paper, and other similar financial instruments are all money market instruments. Read on to learn more about features of money market instruments and become the subject matter expert on it.

Read more deeply to learn more about the topic of characteristics of indian money market. Money market instruments are a type of short-term debt instrument that companies use to get money. Most of the time, these kinds of debt products have a fixed interest rate and don’t need any collateral. As there is no collateral backing, there is a high probability of non-repayment. But because they have a good credit rating, companies that sell money market instruments are not likely to stop paying investors what they owe them.

Top 10 – Features of Money Market Instruments

Money market products give lenders the cash they need and also help borrowers with their short-term needs. The India money market trades various financial instruments such as treasury bills, repurchase agreements, commercial papers, certificates of deposit, and banker’s acceptance. This topic outlines features of money market instruments which will assist you to achieve desired goals in your life.


Everyone knows that people who own money market funds have a lot of freedom when it comes to making financial choices. Money market funds allow for quick addition or withdrawal of investments, typically within just a few days.

Two people made the first bills as written agreements that one person would pay the other a specific amount of money at a particular time in the future. There is a grace period of three days after 90 days, during which the full payment is still due. There are two parts to a promissory note: the Promisor and the Payee.


People consider money market instruments to be some of the safest investments because of their ease of purchase and sale, as well as the reliability of the institutions that offer them. For example, the full faith and credit of the U.S. government backs up Treasury bills. The FDIC will cover up to $250,000 in money market deposit accounts. But just to be clear, “low risk” and “risk-free” are not the same thing. Investing in some money market instruments can be risky.

For example, commercial paper is only as safe as the company that made it. Money market instruments are usually safer than mutual funds or stocks, which may be the best reason to choose them over other short-term investments. Depending on the duration of the investment, money market instruments can provide a favorable rate of return.

Call and Notice Money

In a market called the “call money market,” people lend and borrow money every day. The notice market, on the other hand, is a special kind of financial market that lets borrowers and lenders do business with up to 14 days’ notice.

In these markets, people can get money without having to put up collateral. When a borrower issues a depository receipt to a lender, the lender can expect to receive back the principal amount plus interest.

Key Monetary Policy Decisions

Since they make up a big part of the short-term market, they have an effect on the short-term interest rate. This gives the Reserve Bank of India better information to use when making decisions about future interest rates and the overall direction of monetary policy.

Provide Short-Term Liquidity

Liquidity benefits both buyers and sellers since they hold these investments for short periods of time. The Reserve Bank of India (RBI), which is in charge of them, must also make sure that businesses and consumers have enough cash on hand.

Discount Pricing 

Another interesting thing about money market instruments is that they are often sold for less than what they are worth. When first issued, they sell at a discount from their face value to the public.

Optimize Usage of Funds

Smart investments could be a good way to use money that hasn’t been spent or is extra. The borrower also gets something out of the deal because they can get cash quickly to pay for something they need right away. Money market instruments could be a good way for businesses to get the operating capital they need.

Secure Investment

One of the safest and most stable ways to invest today is in these instruments. Due to the high creditworthiness of money market instrument issuers and the certainty of their returns, the chance of losing your investment is low.

Fixed Returns

Because money market instruments are sold for less than their face value, the amount an investor will get at maturity is already known. Customers get first-rate help picking the instrument that fits their needs and investment time frame the best.

High Liquidity

One of the most important things about these financial assets is that they are very liquid. They give the investor a steady flow of cash and pay off quickly. Because of this, most people think that the instruments that are traded on money markets are good alternatives to money. Money market instruments trade quite liquidly. The market’s liquidity enables quick returns. So, they can choose the best tools for the job.

Frequently Asked Questions

Which Instrument is Unsecured in Money Market?

Large companies typically issue unsecured short-term promissory notes, referred to as commercial paper, both in financial and non-financial sectors. Companies that are financially stable and still have access to bank credit lines have a low chance of not being able to pay their bills.

The main types of money traded on the money market are Treasury bills, commercial papers, CDs, and call money. There is a lot of liquidity because all of the instruments have less than a year until they are due.

Why are Money Market Instruments Used?

Money market instruments can help both public and private institutions meet their short-term financing needs and keep their operations running smoothly. Commercial banks, brokers, discount houses, and acceptance houses, can make the necessary funds available by discounting the trade bills.

How Money Market Instruments are Traded?

Because of how the over-the-counter money market and related instruments work, private investors are often not able to trade directly. You must use a licensed broker or a money market mutual fund for this. The general public does not have either choice.


In India, the Reserve Bank of India (RBI) defines “money market” as the market for trading assets with a maturity date of three months or less. These assets can help move money between the primary market and the secondary market by acting as a de facto monetary system. “Short-term” in this context usually means less than a year.

One can perceive the money market as a system that simplifies short-term borrowing and lending. Conversely, money market instruments are tools that facilitate money market transactions. This article goes into detail about Money Market Instruments and all the things you need to know about them.

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