Money Markets and Capital Markets - Advanced Study Notes | MODULE D: FINANCIAL PRODUCTS AND SERVICES
Money Markets and Capital Markets Money markets and capital markets are integral components of the financial system. Money markets focus on short-term borrowing and lending (typically up to one year), while capital markets deal with long-term investments and financing. Call Money, Notice Money, and Term Money Call Money: Loans repayable on demand, typically with a maturity of 1 day. Notice Money: Loans with a maturity of 2-14 days. Term Money: Money lent for a fixed term of over 14 days. Mathematical Example: Suppose a bank lends ₹5,000,000 as call money at an interest rate of 3% p.a. for 2 days. Interest = Principal × Rate × Time = ₹5,000,000 × (0.03/365) × 2 = ₹821.92 Treasury Bills (T-Bills) Treasury Bills are short-term debt instruments issued by the government, typically for 91, 182, or 364 days, sold at a discount and redeemed at face...