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Questions and Answers
What is the primary function of DFHI in the money market?
What is the primary function of DFHI in the money market?
- To borrow and lend in various money market segments, including call, notice, and term money markets. (correct)
- To facilitate the development of an active secondary market for treasury bills.
- To purchase and sell government securities directly from the government.
- To act as a market maker for commercial bills and certificates of deposit (CDs).
Which of the following instruments does DFHI NOT deal with?
Which of the following instruments does DFHI NOT deal with?
- Treasury bills
- Government securities (correct)
- Commercial bills
- Certificates of deposit (CDs)
What is the primary role of DFHI in the secondary market for money market instruments?
What is the primary role of DFHI in the secondary market for money market instruments?
- To purchase and sell treasury bills directly from the government.
- To facilitate the development of an active primary market for money market instruments.
- To facilitate corporate entities and other bodies to invest their short-term surpluses.
- To act as a market maker by quoting daily bid and offer rates. (correct)
What is the primary role of a primary dealer in the government securities market?
What is the primary role of a primary dealer in the government securities market?
What was the primary objective of establishing the Primary Dealer business model in India?
What was the primary objective of establishing the Primary Dealer business model in India?
Which institution was among the first Primary Dealers in India, set up in 1994 as a subsidiary of RBI?
Which institution was among the first Primary Dealers in India, set up in 1994 as a subsidiary of RBI?
What happened to STCI after RBI divested its stake in 1998 and 2000?
What happened to STCI after RBI divested its stake in 1998 and 2000?
Which of the following statements is NOT true about STCI Primary Dealer Ltd (STCI PD)?
Which of the following statements is NOT true about STCI Primary Dealer Ltd (STCI PD)?
What is the primary function of a primary dealer in the government securities market, as mentioned in the text?
What is the primary function of a primary dealer in the government securities market, as mentioned in the text?
Which of the following institutions was NOT mentioned in the text as being involved in the Primary Dealer business in India?
Which of the following institutions was NOT mentioned in the text as being involved in the Primary Dealer business in India?
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Study Notes
Money Market Overview
- The money market is a short-term debt securities market with average maturities of one year or less.
- It enables governments, banks, and institutions to sell securities to fund short-term cash flow needs.
- Individual investors can invest in the money market through money market mutual funds or accounts.
Characteristics of a Developed Money Market
- Existence of organized exchange market for short-term debt securities.
- Presence of wholesale and retail markets for money market transactions.
- Short-term debt products traded include overnight reserves and commercial paper.
- High degree of safety and relatively low rates of return.
Institutions in the Money Market
- FIMMDA (Fixed Income Money Market and Derivatives Association of India) facilitates the smooth functioning of the money market.
- FEDAI (Foreign Exchange Dealers Association of India) provides guidelines and rules for forex business, training, and accreditation.
- SBI DFHI Limited is a standalone primary dealer that supports the book building process in primary auctions of government securities.
Functions of SBI DFHI
- Participates in transactions in all money market segments.
- Borrows and lends in the call, notice, and term money markets.
- Purchases and sells treasury bills, commercial bills, CDs, and CPs.
- Quotes daily bid and offer rates for money market instruments.
Other Institutions
- STCI Finance Ltd. was one of the first primary dealers in India, established in 1994 as a subsidiary of RBI.
- STCI Primary Dealer Ltd. is a wholly owned subsidiary of STCI Finance Ltd.
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