Discount Market

Slide 1:

Presentation For Internal assessment requirement Topic: Discount Market Submitted To: Submitted by : Mr. Pardeep Kumar Parneet Assist. Prof. of MFS 175 MBA 2 nd

Money market:

Money market “ The money market is the collective name given to the various firms and institutions that deal in the various grades of near money.” __ Crowther

Discount Market:

Discount Market The part of the money market consisting of banks, discount houses, and brokers on which bills are discounted a trading market in which notes, bills, and other negotiable instruments are discounted. A market for borrowing and lending money, through certificates of deposit, Treasury bills, etc

Contd.:

Contd . Discount market refers to the market where short-term genuine trade bills are discounted by financial intermediaries like commercial banks. When credit sales are effected, the seller draws a bill on the buyer who accepts it promising to pay the specified sum at the specified period. The seller has to wait until the maturity of the bill for getting payment. But, the presence of a bill market enables him to get payment immediately. The seller can ensure payment immediately by discounting the bill with some financial intermediary by paying a small amount of money called ‘ Discount rate ’ on the date of maturity, the intermediary claims the amount of the bill from the person who has accepted the bill.

Objectives of Discount market:

Objectives of Discount market Smoothening liquidity. Integration. Market maker. Promoting market. Investment Avenue.

DFHI:

DFHI Discount and Finance House of India Ltd. (DFHI), a unique institution of its kind, was set up in April 1988. The share capital of DFHI is Rs 200 crores, which has been subscribed by Reserve Bank of India (10.5%), Public sector banks (62%) and Financial Institutions (26.6%). The discount has been established to deal in money market instruments in order to provide liquidity in the money market. Thus the task assigned to DFHI is to develop a secondary market in the existing money market instruments .

DFHI is active in:

DFHI is active in it is active in three areas: - The inter-bank call money market, The 181 days treasury bills, And The bills discounting.

Importance of DFHI:

Importance of DFHI Minimizing Liquidity Balances. Two way quotes. Authorized institutions for govt. securities. Deepening the money market. Facility for Deploying short term surpluses. Constituent SGL Account facility. REPO facility. Extension of money market. Developing Primary and secondary market in Financial instruments.

Challenges for DFHI:

Challenges for DFHI Mounting Competition. Uncertainties of interest rates Abundance of liquidity in the system. Falling yields from govt. securities Rapid changes in market conditions and regulatory framework.