The instruments in the whole sale debt market can be classified in two categories, viz., Short term and long - term instruments. Short-term instruments are those having maturity of less than a year and long term instruments are those having a maturity of more than a year.

Short - term instruments

Money market Instruments: Money market is the most liquid market and very short term in nature. Money market instruments are those with maturity less than a year and highly liquid. Overnight inter bank call money market, commercial paper market, certificate of deposit market and T-bills market come under the purview of money market.

Inter bank call money market is one in which banks and FIs lend and borrow funds from each other to manage their liquidity. It is the most liquid market in any economy with maturity ranging from one day to 15 days. Repo transactions are also executed in this market. Its an auction based market where yields are determined on the basis of competitive bidding and on the basis of demand for and supply of funds on a particular day.

Commercial paper is a debt instrument issued by a corporate with a very good credit rating to meet its working capital requirements. Corporates usually take this route when the rates in the money market are lower than working capital finance rates of the banks. It's a highly liquid market and these instruments have a maximum maturity period of 1 year and it goes as low as 1 month and it can be rolled over. The minimum denomination for issue of such securities is Rs. 25 lakhs. The issuers are usually highly rated corporates. The issuer has to be compulsorily by any of the credit rating agencies.

Certificate of deposit is a debt instrument issued by a Commercial Bank to meet its short-term requirement of funds. These instruments have a maximum maturity period of 1 year and in special cases, it can go up to 1 and a half years with special permission of the RBI. The minimum denomination of CD is Rs. 5 lakh.

T-bills are the sovereign securities issued by the Government of the respective country to tide over the temporary imbalance between receipts and expenditures. Usually, there is a time lag between the receipts and expenditures of Government and during that time, the Govt. issues the T-bills to make up this imbalance. Presently, in India, we have 14 day T-bills, 91 day, 182 day and 364 day T-bills. The RBI issues securities on behalf of the GoI and the yields are determined on the basis of competitive bidding. The auction is conducted on the French auction basis, i.e., all the bidders above the cutoff price will get the amount of securities issued in their name for which they had bid for, while the bidders at the cutoff price are issued securities on a pro rata basis.

Short - term debentures are issued by Corporates for their short - term funds requirements. These are just like normal debentures with only one difference that they are very short - term in nature.

Long - term Debt Instruments

Long - term debt instruments are those debt instruments having a maturity of more than a year. Following debt instruments come under the purview of these instruments:

GoI dated securities are securities issued by the GoI to meet its financial requirements for long - term investments. They have maturity ranging from 1 to 30 years. These securities are also issued on the French auction basis. These securities are issued by the GoI to finance its investments it makes in the infrastructure and industry, which is fairly long - term in nature.

PSU bonds are long term debt instruments issued by the PSUs. They have maturity ranging from 5 - 10 years. Generally these bonds are privately placed with select individuals to reduce the issue cost. These bonds are issued by PSUs to meet their long - term financial requirements like an expansion or acquisition of an asset etc. They carry high liquidity because these are the instruments issued by Blue-chip PSUs and guaranteed by the GoI.

Bonds of Development Finance Institutions are long term debt instruments issued by the DFIs. These DFIs issue bonds in 2 ways - through a public issue for the retail investors and also through private placement route to certain selected investors. They issue these bonds to finance the long - term credit they provide to the commercial sector. They have maturity ranging from 5 - 10 years and in some cases even more than that.

Long term debentures are long term debt instruments issued by Corporates. These debentures are issued by corporates to finance their long - term funds requirement having a maturity of 5 - 7 years (generally).