T-bills, CD, FIMMDA, capital market, FDI


  • Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India. It is first issued in India in 1917.
  • Treasury bills are zero coupon securities and pay no interest. They are issued at a discount and redeemed at the face value at maturity.
  • The return to the investors is the difference between the maturity value or the face value (that is Rs.100) and the issue price. They are issued at a discount and redeemed face value at maturity.
  • Treasury bills can be purchased by any one (including individual) expect State govt.


  1. The bills are of two kinds - Adhoc and Regular
  2. The Adhoc bills are issued for investment by the state governments, semi government departments and foreign central banks for temporary investment. They are not sold to banks and general public. Ad-hoc bills were abolished in April 1997.
  3. The Regular treasury bills are sold to the public and banks. They are freely marketable and commercial banks buy entire quantities of such bills, issued on tender. They are bought and sold on discount basis. 


  1. Minimum amount of face value Rs. 25000 & in multiples thereof. There is no specific amount/limit on the extent to which these can be issued or purchased.


  1. Presently issued in three tenors, namely, 91 days, 182 days and 364 days.


  1. RBI sells treasury bills on auction basis (to bidders quoting above the cutoff price fixed by RBI) by calling bids. Auctions are conducted every Wednesday to issue T-bills.



  • Certificate of Deposit (CD) is a negotiable money market instrument and issued in dematerialised form (only wef June 30, 2002) or as a Usance Promissory Note against funds deposited at a bank or other eligible financial institution for a specified time period. It was introduced in India in 1989.
  • Guidelines for issue of CDs are presently governed by various directives issued by the Reserve Bank of India (RBI), as amended from time to time. There is no lock-in period for the CDs. It cannot buy back their own CDs before maturity.
  • Banks have the freedom to issue CDs depending on their funding requirements. CDs in physical form are freely transferable by endorsement and delivery. CDs in demat form can be transferred as per the procedure applicable to other demat securities. Banks/FIs cannot grant loans against CDs.


CDs can be issued by 

  1. Scheduled commercial banks {excluding Regional Rural Banks and Local Area Banks} and 
  2. Selected All-India Financial Institutions (FIs) that have been permitted by RBI to raise short-term resources within the umbrella limit fixed by RBI.

Minimum Size of Issue and Denominations

  1. Minimum amount of a CD should be Rs.1 lakh, i.e., the minimum deposit that could be accepted from a single subscriber should not be less than Rs.1 lakh, and in multiples of Rs. 1 lakh thereafter.


  1. CDs can be issued to individuals, corporations, companies (including banks and PDs), trusts, funds, associations, etc. 
  2. Non-Resident Indians (NRIs) may also subscribe to CDs, but only on nonrepatriable basis, which should be clearly stated on the Certificate. 
  3. Such CDs cannot be endorsed to another NRI in the secondary market.


  1. The maturity period of CDs issued by banks should not be less than 7 days and not more than one year, from the date of issue. The FIs can issue CDs for a period not less than 1 year and not exceeding 3 years from the date of issue.

Reserve Requirements

  1. Banks have to maintain appropriate reserve requirements, i.e., cash reserve ratio (CRR) and statutory liquidity ratio (SLR), on the issue price of the CDs.



  • The Government of India, in consultation with the Reserve Bank of India, has decided to issue a new short-term instrument, known as Cash Management Bills, to meet the temporary cash flow mismatches of the Government. 
  • The Cash Management Bills will be non-standard, discounted instruments issued for maturities less than 91 days.
  • The Cash Management Bills will have the generic character of Treasury Bills. The proposed Bills will be issued at discount to the face value through auctions, as in the case of the Treasury Bills.
  • The Non-Competitive Bidding Scheme for Treasury Bills will not be extended to the Cash Management Bills.
  • The tenure or maturity notified amount (how much total CMBs to be issued) and date of issue of the CMBs depends upon the temporary cash requirement of the Government.

CMBs are eligible as SLR securities. Investment in CMBs is also recognized as an eligible investment in Government securities by banks for SLR purpose under Section 24 of the Banking Regulation Act, 1949. REPURCHASE AGREEMENT

A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day.



  • FIMMDA stands for the Fixed Income Money Market and Derivatives Association of India (FIMMDA) is an association of Commercial Banks, Financial Institutions and Primary Dealers. 
  • FIMMDA was incorporated as a Company under section 25 of the Companies Act, 1956 on June 3rd, 1998. FIMMDA is a voluntary market body for the bond, Money and Derivatives Markets.
  • It acts as an interface with the regulators on various issues that impact the functioning of these markets. It also undertakes developmental activities, such as, introduction of benchmark rates and new derivatives instruments, etc.
  • FIMMDA releases rates of various Government securities that are used by market participants for valuation purposes. FIMMDA also plays a constructive role in the evolution of best market practices by its members so that the market as a whole operates transparently as well as efficiently.
  • The Reserve Bank has appointed the Financial Benchmark India Pvt Ltd (FBIL) for valuation of portfolios of government securities, which earlier used to be done by FIMMDA. (As of current news) 
  • As per RBI directive, FIMMDA has ceased to publish prices/yield of government securities from March 31, 2018. 



A capital market is a financial market in which long-term debt (over a year) or equity-backed securities are bought and sold. Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments. Capital markets help channelize surplus funds from savers to institutions which then invest them into productive use. Generally, this market trades mostly in long-term securities.

Securities Market

A securities market is a market where securities are traded either on physical or electronic exchanges. Securities markets are generally divided between stock markets and bond markets. A stock market involves the trade of equity securities, which are ownership interests of a company commonly known as shares.

Two Important Stock Exchanges in India

Bombay Stock Exchange (BSE) 

The Bombay Stock Exchange (BSE) is an Indian stock exchange established in 1875, the BSE (formerly known as Bombay Stock Exchange Ltd.). It is the Asia’s first stock exchange. It claims to be the world's fastest stock exchange, with a median trade speed of 6 microseconds. The BSE is the world's 10th largest stock exchange with an overall market capitalization of more than $2.3 trillion on as of April 2018.

Over the past 141 years, BSE has facilitated the growth of the Indian corporate sector by providing it an efficient capital-raising platform. BSE's popular equity index - the S&P BSE SENSEX - is India's most widely tracked stock market benchmark index. It is traded internationally on the EUREX as well as leading exchanges of the BRCS nations (Brazil, Russia, China and South Africa).

The BSE is also a Partner Exchange of the United Nations Sustainable

Stock Exchange initiative, joining in September 2012. BSE established India INX on 30 December 2016. India INX is the first international exchange of India. Its headquarters is located in Mumbai, Maharashtra. Chairman of BSE – S Ravi; Ashishkumar Chauhan (MD & CEO).


National Stock Exchange (NSE) 

The National Stock Exchange of India Limited (NSE) is the leading stock exchange of India. The NSE was established in 1992 as the first demutualized electronic exchange in the country. 

NSE was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system which offered easy trading facility to the investors spread across the length and breadth of the country. Vikram Limaye is Managing Director & Chief Executive Officer (MD & CEO) of NSE. Ashok Chawla is the chairman of NSE. Its headquarters is located in Mumbai, Maharashtra.

National Stock Exchange has a total market capitalization of more than US$2.27 trillion, making it the world’s 11th-largest stock exchange as of April 2018. NSE's flagship index, the NIFTY 50, the 50-stock index is used extensively by investors in India and around the world as a barometer of the Indian capital markets. Nifty 50 index was launched in 1996 by the NSE. 



External Commercial Borrowing (ECBs) are loans in India made by nonresident lenders in foreign currency to Indian borrowers. They are used widely in India to facilitate access to foreign money by Indian corporations and PSUs (public sector undertakings). 

ECBs include commercial bank loans, buyers' credit, suppliers' credit, securitised instruments such as floating rate notes and fixed rate bonds etc. RBI has decided to increase ECB Liability to Equity Ratio for ECB raised from direct foreign equity holder under automatic route to 7:1. It should be noted that ECBs are not FDI. In case of FDI, foreign money is used only to finance the equity Capital. But in case ECBs, foreign money is used to finance any kind of funding other than equity.

Individual Limits:

  1. Up to USD 750 million or equivalent - for the companies in infrastructure and manufacturing sectors, Non-Banking Financial Companies - Infrastructure Finance Companies (NBFC-IFCs), NBFCs-Asset Finance Companies (NBFC-AFCs), Holding Companies and Core Investment Companies.
  2. Up to USD 200 million or equivalent - for companies in software development sector.
  3. Up to USD 100 million or equivalent - for entities engaged in micro finance activities.
  4. Up to USD 500 million or equivalent for remaining entities.


Foreign Direct Investment (FDI)

Foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company. 

Foreign Direct Investments are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies.


Indian company receive foreign investment

There are two routes under which foreign investment can be made is as under:

  1. Automatic Route: Foreign Investment is allowed under the automatic route without prior approval of the Government or the Reserve Bank of India, in all activities/ sectors as specified in the Regulation 16 of FEMA 20 (R).
  2. Government Route: Foreign investment in activities not covered under the automatic route requires prior approval of the Government.  Foreign Investment Promotion Board (FIPB) which was the responsible agency to oversee this route was abolished on May 24, 2017.



Foreign Investment:

Foreign Investment means any investment made by a person resident outside India on a repatriable basis in capital instruments of an Indian company or to the capital of an LLP.


Foreign Portfolio Investment (FPI)

In economics, Foreign Portfolio Investment is the entry of funds into a country where foreigners deposit money in a country's bank or make purchases in the country’s stock and bond markets, sometimes for speculation. 

Foreign portfolio investment shows up in a country's capital account. It is also part of the balance of payments which measures the amount of money flowing in and out of a country over a given time period.

Qualified Foreign Investor (QFI)

The Qualified Foreign Investor (QFI) is sub-category of Foreign Portfolio Investor and refers to any foreign individuals, groups or associations, or resident, however, restricted to those from a country that is a member of Financial Action Task Force (FATF) or a country that is a member of a group which is a member of FATF and a country that is a signatory to International Organization of Securities Commission’s (IOSCO) Multilateral Memorandum of Understanding (MMOU).  QFI scheme was introduced by Government of India in consultation with RBI and SEBI in the year 2011. The policy decision is aimed to increase the depth of the Indian Market and widen the range of investors. QFIs, have now been merged in to Foreign Portfolio Investors (FPI), when the FPI regulations were introduced in 2014.

The objective of enabling QFIs is to deepen and infuse more foreign funds in the Indian capital market and to reduce market volatility as individuals are considered to be long term investors, as compared to institutional investors.

If the QFI is an Institutional investor such as hedge funds, insurance companies, pension funds and mutual funds, which are registered out of India would be called QFII (Qualified Foreign Institutional Investors).

Difference between FDI and FPI

FDI(Foreign Direct FPI (Foreign Portfolio Investment)  Investment)

FDI is a long-term process wherein the investor reflects a long-lasting FPI is a short-term process and controlling interest in the firm.

FDI is a direct investment in FPI is an indirect investment in the buildings, technologies, equipment foreign firm by simply buying the and machinery belonging to the stocks of the company and not getting firm of a host country (foreign involved in any major activities of the firm).    firm.

It is difficult to sell off the shares It is easy to sell off the shares in FPI in FDI

FPI investors are less vulnerable to FPI investors are more vulnerable to liquidity. liquidity. Investment is greater than 10% Investment is less than 10% Investment gives investors Investment gives investors only ownership right as well as ownership right and not management

management right