Page 44 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 3: Financial Markets

declined drastically during 1975-80 and no bills appeared to have been rediscounted with the Notes
RBI after 1980-81. This new policy has, however, not worked well, as evidenced from the
remarkable decline in the share of bill finance in the total bank credit.

Did u know? A number of committees, such as the Tandon Committee, Chore Committee,
Chakravarti Committee and Vaghul Committee were appointed during the 70s and 80s to
look into the issue of undeveloped character of bill market in the country and make
recommendations for building strong and vibrant bill market. Keeping in view the
recommendations of these committees, the RBI initiated several measures to develop the
bill market in India. Some of these measures taken recently but before the reform period
were as under:

Banks were directed to fix the CAS parties now coming under the credit Monitoring
Scheme a minimum of 25 per cent of their inland credit purchases as bill acceptance limit
and a bill discounting limit of the same order by suitably reducing the facility against
financing inland credit sales.
1. The RBI approached the Government of India for the remission of stamp duty on bill
of exchange which was readily accepted.
2. The RBI, in its endeavour to simplify the procedures and documentation for
facilitating successive rounds of rediscounting and thereby developing the secondary
market for bills, introduced in September, 1988, a derivative usance promissory
note to be issued by the discounter on the strength of underlying bills having a
tenor corresponding to or less than the tenor of the derivative usance promissory
note and in any case not more than 90 days. The derivative promissory note has
been exempted from stamp duty.
3. The RBI made access to the bill rediscounting market less restrictive and increased
the number of participants in the scheme by permitting a large number of financial
institutions including select urban cooperative banks eligible to rediscount bills.
4. The RBI set up jointly with banks and financial institutions, the DFHI as a major
financial institution for the development of the money market including the market
for commercial bills.

3.6 Participants of Indian Money Market

3.6.1 Participants in Call Money Market

Example: Examples of Players in call money market in India are:
1. Reserve Bank of India
2. Scheduled Commercial Banks
3. Non-Scheduled Commercial Banks

4. Foreign Banks
5. State, District and Urban Cooperative Banks
6. Discount and Finance House of India (DFHI)

7. Securities Trading Corporation of India (STCI)

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