Make your Current account work Overtime for you
OxyFin Explores
Current Account Balances mostly don’t work Overtime – It means most cases it doesn’t Earn us any interest.
Out of 365 days Bank Accounts Remain idle for 116 days* (52 Sundays + 52 Saturdays + 12 Public Holidays)
Max return from Liquid Plus for a year had been 8.92%.
Means NET return per day on every 1 Cr will work out to be – Rs. 2444/-.
116 days* for every Cr = 2.83 lacs
28.3 Lacs in case of every 10 Cr
Corporate Treasure Series
Investing in Liquid Funds
Overview
• Corporates seek to fulfill three primary objectives while deciding their investment options - Principal Conservation – Liquidity - Returns
• A Liquid Mutual Fund is a product specifically designed to fit in the aforesaid framework.
• Liquid funds are fixed income funds ideal for investors with a short-term investment horizon and low risk appetite. Returns from liquid funds are generally in line with the overnight inter bank call rate/ MIBOR /CBLO.
Benefits of investing in Liquid Funds
Diversification: Investors’ money is spread across different securities and companies, depending upon the scheme’s investment objective. This diversified exposure helps reduce risk.
Professional Management: Portfolios are managed by highly qualified and experienced professionals.
Transparency: Detailed portfolios are published regularly. Also, specific details are available on request.
Operational benefits:
- Easy liquidity: Redemptions from Liquid Funds are on T+1 basis with certain pre-conditions
- No Lock-In Period: Unlike Bank FDs which have a minimum lock-in period, Liquid Funds can be used even for overnight investments.
- No charges: Liquid Funds do not have any entry or exit loads (in some schemes for short period) hence investors are free to withdraw their money at any point of time.
- Weekend parking: Liquid funds declare NAV on Sundays and therefore enable investors to earn money over the weekend, instead of keeping it idle.
Thursday, April 29, 2010
Sunday, September 6, 2009
Monday, August 10, 2009
Securities Law
Short Notes
1) Rolling Settlement :-
Under this rolling settlement, unlike in the “account period settlements” the trades done on a particular day are settled after a given number of business days instead of settling all trades done during an “account period” of a week or fortnight. In the prevailing T+2 settlement cycle, the final settlement of transactions done on T i.e. trade day by exchange of monies and securities between the buyer and sellers respectively takes place on second business day (excluding Saturdays, Sundays, bank and exchange trading holidays) after the trading day.
In case of Rolling Settlements, pay in and payout of both funds and securities is completed on the same day. Each trading day is considered as a trading period and trades executed during the day are netted to obtain the net obligations for the day in a rolling settlement.
2) Whistler Blower Policy:-
A Company may establish “whistler Blower Policy” for its employees to enable them to report to the managements concerns about the unethical behavior, actual or suspected fraud or violations of the companies code of conduct or ethics policy. The policy should provide for adequate safeguard against victimization of employees who avail of the mechanism and also provides for direct access to the chairmen of the Audit committee in exceptional cases. Once established, the existence of the mechanism of Whistler Blower should appropriately be communicated within the organization. Whistler Blower policy is also one of the non-mandatory requirements of the revised clause 49 of the listing agreements.
3) Indian Depository Receipt:-
Indian Depository Receipt means any instrument in the form of a depository receipt created by domestic depository in India against the underlying equity shares of issuing company. Domestic depository for the purpose means custodian of securities registered with SEBI and authorized by the issuing company to issue Indian depository receipts. Overseas custodian banks in respect of issuance of IDR is a banking company which is established in a country outside India and has a place of business in India and acts as custodian for the equity shares of issuing company against which IDRs are proposed to be issued after having obtained permission from ministry of Finance for doing such business in India.
4) Money Market Mutual Funds:-
In India, the decision to promote MMMF was announced by RBI while unveiling its credit policy in April 1991. MMMF is a scheme of a mutual fund setup with the objective of investing exclusively in money market instruments. These funds invests in short-term debt securities in the money market like certificates of deposits, commercial papers, Govt. treasury bills etc., Owing to there large size, the funds normally get a higher yield on such short term investments than an individual investor. MMMF are regarded as high liquidity oriented as investors attach more value for safety and liquidity. MMMF used to be regulated by the RBI on the basis of specified guidelines to be laid down by the RBI. However, w.e.f. march 7,2000 RBI withdrew these guidelines and it was notified by SEBI later on that the MMMF schemes, like other mutual funds schemes would exclusively governed by SEBI (mutual funds) Regulation 1996.
5) Straight Through Processing:-
Straight Through Processing (STP) is generally understood to be a mechanism that automates the end to end processing of transactions of financial instruments. It involves use of a system to process or control all elements of the workflow of a financial transaction, what are commonly known as the front, middle, back office and general ledger. In other words, STP allows electronic capturing and processing of transactions in one pass from the point of order origination to final settlements. STP thus, streamlines the process of the trade execution and settlement and avoids manual entry and re-entry of the details of the same trade by different market intermediaries and participants. Usage of STP enables orders to be processed confirmed, settled in a short time period and in a more cost effective manner with fewer errors. Apart from compressing the clearing and settlement time STP also provides a flexible, cost effective infrastructure which enables e-business expansion through online processing and access to enterprise data.
6) Capital Indexed Bonds:-
Capital Indexed Bonds are bonds where interest rate is fixed percentage over the wholesale price index. Capital Indexed Bonds are therefore call inflation-protection securities such bonds provide good hedge against inflation risk. The benefits do extend beyond hedging. Capital indexed bonds can be used as a market indicator inflation expectation. This help investors to make a move intelligent decisions on their current consumption. Finally the spot yield curve can be better constructed based on the real yields
7) Unique Identification Number:-
SEBI (Central database of market participants) regulations, 2003 requires every specified intermediary, other entity. Specified listed company and specified investor to make application for allotment of Unique Identification Number for itself and for its related persons. Unique identification number means the identification number generated in central database for and allotted to each applicant under the regulations. Specified intermediaries, investors, listed company mean such intermediaries are other entities as may be specified by SEBI in the notification published in the official gazette pursuant to regulations. Till date, almost all the intermediaries have been specified for obtaining unique identification number. However, SEBI suspended all registration for unique identification number from July 1st 2005 following the recommendation of the Sebi committee to examine issues relating to MAPIN.
8) Sweat equity shares:-
Sweat equity shares are shares allotted to employees of companies, as rewards, free cost or at a price which is considerably below the rolling market price it is given as a reward for performance to further encourage them to put in their best in the organization. Under the companies act 1956, Sweat equity shares means shares issued by a company to its employees or directors at the discount or consideration other than cash for providing know how or making available rights in the nature of intellectual property rights.
Sweat equity shares are used as a tool for retaining experienced personal at senior level. The increase in competition has increased the fear of losing personal to a competitor the concept of sweat equity shares is gaining popularity these days in information technology, telecom and knowledge based economic sectors.
9) Capital market vs money markets:-
The capital market is a market for financial investments that are direct or indirect claims to capital. It is wider than the securities market and embraces all form of lending and borrowing the capital market comprises the complex of institutions and mechanisms through which intermediate term funds and long term funds are pooled and made available to business, government and individuals. The capital market also encompasses the process by which securities already outstanding are transferred.
The money market refers to the market where borrowers and lenders exchange short term funds to solve their liquidity needs. Money market instruments are generally financial claims that have low default risk maturities under one year and high marketability.
10) Carrot and stick bond:-
In Carrot and Stick Bonds, carrot is the lower than normal conversion premium i.e. the premium over the present market price of the equity shares is fixed at a reasonable level so that the price of the equity shares need not increase significantly to make conversion practical. The stick is the issuer’s right to call the issue at a specified premium if the price of the equity shares is traded above a specified percentage of the conversion price.
11) Basket trading system:-
The Bombay Stock Exchange provides the investors as well as its member brokers a facility of Basket Trading System, with a view to provide investors the facility of creating sensex linked portfolio and also to create a linkage of market prices of the underlying securities of sensex in the cash segment and futures on sensex. In this system the investors through the member brokers of the exchange are able to buy or sell all 30 scrips of sensex in one go in the proportion of their respective weights in the sensex. The investors can also create their own baskets by deleting certain scripts from 30 scripts in the sensex.
12) Employees stock option:-
Employee Stock Option means the option given to the whole-time directors, officers or employees’ of a Company which gives them the right to purchase or subscribe at a future date the securities offered by the company at a pre-determined price. Employee stock option plays vital role in rewarding and motivating employees in attracting and retaining the best talent in the company.
13) Collective investment scheme:-
Collective Investment Scheme (CIS) under SEBI (Collective Investment Schemes) Regulations, 1999 means any scheme or arrangement made or offered by any company under which:
(a) The contributions, or payments made by the investors, by whatever name called, are pooled and utilized solely for the purposes of the scheme or arrangement.
(b) The contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement.
(c) The property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; and
(d) The investors do not have day-to-day control over the management and operation of the scheme or arrangement.
The CIS Regulations, however, excludes any scheme or arrangement made or offered by a co-operative society, deposits accepted by non-banking financial companies; contract of insurance; deposits accepted under section 58A of the Companies Act, 1956 etc.
14) Ombudsman in stock market:-
“Ombudsman” means any person appointed under regulation 3 of SEBI (Ombudsman) regulations, 2003 and unless the context otherwise requires, includes stipendiary Ombudsman. Regulation 2(n) of the Regulations defines stipendiary ombudsman as a person appointed under Regulation 9 for purpose of acting as Ombudsman in respect of a specific matter or matters in a specific territorial jurisdiction and for which he may be paid such expenses, honorarium, sitting fees as may be determined by the board from time to time.
An Ombudsman has crucial role to pay in redressal of investors grievances. Any person who has a grievance against a listed company or any intermediary relation to the of the matters specified in SEBI (Ombudsman) regulations may himself or through his authorized representative or any investors association recognized by SEBI, make a complaint to the ombudsman within whose jurisdiction the registered or corporate office of such listed company or intermediary is located. If SEBI has not notified any Ombudsman for a particular locality or territorial jurisdiction, the complainant may request the Ombudsman located at the Head Office of the SEBI for forwarding his complaint to competent jurisdiction. The powers and functions of Ombudsman have also been defined under the said Regulations.
15) Exchange Traded Funds:-
Exchange traded funds ETFs represent a basket of securities that are traded on an exchange. They are similar to index mutual funds but are traded more like a stock. They are a rapidly growing class of financial products and are typically organized as unit trusts. ETFs can be bought and sold throughout the trading day, allowing for intraday trading-which is rare with mutual funds. Unlike mutual funds ETFs do not trade necessarily at the net asset values of their underlying holdings, meaning an ETF could potentially trade above or below the value of underlying portfolios.
16) Central Listing Authority:-
Regulation 3 of sebi (Central Listing Authority) Regulations prescribes for the establishment of an authority to be called the “central listing authority” with the functions delegated to it by SEBI. It provides that the head office of the authority is to be located in Mumbai. However, the authority may, with prior approval of SEBI, establish such branch or regional officers as may necessary the authority has been empowered to perform the following functions:-
1) To receive and process application for letter precedent to listing from applicants and issue, if it is deems fit, a letter precedent to listing to any such applicant
2) To make recommendations to SEBI on issue pertaining to the protections of the interest of the investors in securities and development and regulation of the securities market, including the listing agreements, listing conditions and disclosers to be made in offer documents.
3) To undertake any other functions as may be delegated to it by SEBI from time to time.
17) Electronic Data Information Filing and Retrieval System:-
This is an automated system for filling, retrieval and dissemination of time sensitive corporate information, which till now were being filed physically by the listed companies with the stock exchanges in India. By centralizing the information through on-line filing, EDIFAR’s primary objective is to centralize the information and accelerate its dissemination and doing so enhance the transparency and efficiency for the benefit of all the stake holders in the securities market.
18) Qualified Institutional Buyers:-
QIB are “Qualified institutional Buyers”. According to the SEBI (Disclosers and investor protection) guidelines, 2000 following are the QIBs
· Public financial institutions as defined in section 4A of the companies Act, 1956
· Scheduled commercial banks
· Mutual funds
· FII registered with SEBI
· Multilateral and bilateral development financial institutions
· Venture capital funds
· Foreign venture capital investors
· SFCs
· Insurance companies registered with IRDA
· Provident funds with minimum corpus of Rs 25 crores
· Pension funds with minimum corpus of Rs 25 crores
These entities are not required to registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in the primary issuance process.
19) Money at Call and Short notice:-
Money at call is outright money. Money at short notice is for maturity of or up to 14 days. Money for higher maturity is know as inter-bank deposits. The participants are banks and all India financial institutions are permitted by RBI. From April 1991, corporate with specified minimum lendable resources for transaction have also been permitted to lend in the market through DFHI.
The market is an over-the-telephone market. Non-bank participant at as lenders only. Banks borrow for a variety of reasons to maintain there CRR, to meet heavy payments (ex: withdrawals by customers for payment of taxes), to adjust their maturity mismatch etc. there are days of heavy borrowings on these occasions. Consequently depending upon supply, interest rates show wide fluctuations. Corporate treasury management is not as sophisticated as in industrialized countries and through the cash credit system transfers their liquidity management to their banker who in turn resorts to the call money market.
20) Commodity Bonds:-
Commodity bonds are bonds issued to share the risk and profitability of the future commodity prices with the investors. For example petro bonds, silver bonds, gold bonds and coal bonds A petro bonds may carry a fixed rate of interest with part of the face value of the bonds denominated in barrels of oils. There would be a floor in the face value of the bond. In view of the upside profit potential in oil prices the interest rate could be lower than market rate of interest these bonds may be issued decontrolled items
1) Rolling Settlement :-
Under this rolling settlement, unlike in the “account period settlements” the trades done on a particular day are settled after a given number of business days instead of settling all trades done during an “account period” of a week or fortnight. In the prevailing T+2 settlement cycle, the final settlement of transactions done on T i.e. trade day by exchange of monies and securities between the buyer and sellers respectively takes place on second business day (excluding Saturdays, Sundays, bank and exchange trading holidays) after the trading day.
In case of Rolling Settlements, pay in and payout of both funds and securities is completed on the same day. Each trading day is considered as a trading period and trades executed during the day are netted to obtain the net obligations for the day in a rolling settlement.
2) Whistler Blower Policy:-
A Company may establish “whistler Blower Policy” for its employees to enable them to report to the managements concerns about the unethical behavior, actual or suspected fraud or violations of the companies code of conduct or ethics policy. The policy should provide for adequate safeguard against victimization of employees who avail of the mechanism and also provides for direct access to the chairmen of the Audit committee in exceptional cases. Once established, the existence of the mechanism of Whistler Blower should appropriately be communicated within the organization. Whistler Blower policy is also one of the non-mandatory requirements of the revised clause 49 of the listing agreements.
3) Indian Depository Receipt:-
Indian Depository Receipt means any instrument in the form of a depository receipt created by domestic depository in India against the underlying equity shares of issuing company. Domestic depository for the purpose means custodian of securities registered with SEBI and authorized by the issuing company to issue Indian depository receipts. Overseas custodian banks in respect of issuance of IDR is a banking company which is established in a country outside India and has a place of business in India and acts as custodian for the equity shares of issuing company against which IDRs are proposed to be issued after having obtained permission from ministry of Finance for doing such business in India.
4) Money Market Mutual Funds:-
In India, the decision to promote MMMF was announced by RBI while unveiling its credit policy in April 1991. MMMF is a scheme of a mutual fund setup with the objective of investing exclusively in money market instruments. These funds invests in short-term debt securities in the money market like certificates of deposits, commercial papers, Govt. treasury bills etc., Owing to there large size, the funds normally get a higher yield on such short term investments than an individual investor. MMMF are regarded as high liquidity oriented as investors attach more value for safety and liquidity. MMMF used to be regulated by the RBI on the basis of specified guidelines to be laid down by the RBI. However, w.e.f. march 7,2000 RBI withdrew these guidelines and it was notified by SEBI later on that the MMMF schemes, like other mutual funds schemes would exclusively governed by SEBI (mutual funds) Regulation 1996.
5) Straight Through Processing:-
Straight Through Processing (STP) is generally understood to be a mechanism that automates the end to end processing of transactions of financial instruments. It involves use of a system to process or control all elements of the workflow of a financial transaction, what are commonly known as the front, middle, back office and general ledger. In other words, STP allows electronic capturing and processing of transactions in one pass from the point of order origination to final settlements. STP thus, streamlines the process of the trade execution and settlement and avoids manual entry and re-entry of the details of the same trade by different market intermediaries and participants. Usage of STP enables orders to be processed confirmed, settled in a short time period and in a more cost effective manner with fewer errors. Apart from compressing the clearing and settlement time STP also provides a flexible, cost effective infrastructure which enables e-business expansion through online processing and access to enterprise data.
6) Capital Indexed Bonds:-
Capital Indexed Bonds are bonds where interest rate is fixed percentage over the wholesale price index. Capital Indexed Bonds are therefore call inflation-protection securities such bonds provide good hedge against inflation risk. The benefits do extend beyond hedging. Capital indexed bonds can be used as a market indicator inflation expectation. This help investors to make a move intelligent decisions on their current consumption. Finally the spot yield curve can be better constructed based on the real yields
7) Unique Identification Number:-
SEBI (Central database of market participants) regulations, 2003 requires every specified intermediary, other entity. Specified listed company and specified investor to make application for allotment of Unique Identification Number for itself and for its related persons. Unique identification number means the identification number generated in central database for and allotted to each applicant under the regulations. Specified intermediaries, investors, listed company mean such intermediaries are other entities as may be specified by SEBI in the notification published in the official gazette pursuant to regulations. Till date, almost all the intermediaries have been specified for obtaining unique identification number. However, SEBI suspended all registration for unique identification number from July 1st 2005 following the recommendation of the Sebi committee to examine issues relating to MAPIN.
8) Sweat equity shares:-
Sweat equity shares are shares allotted to employees of companies, as rewards, free cost or at a price which is considerably below the rolling market price it is given as a reward for performance to further encourage them to put in their best in the organization. Under the companies act 1956, Sweat equity shares means shares issued by a company to its employees or directors at the discount or consideration other than cash for providing know how or making available rights in the nature of intellectual property rights.
Sweat equity shares are used as a tool for retaining experienced personal at senior level. The increase in competition has increased the fear of losing personal to a competitor the concept of sweat equity shares is gaining popularity these days in information technology, telecom and knowledge based economic sectors.
9) Capital market vs money markets:-
The capital market is a market for financial investments that are direct or indirect claims to capital. It is wider than the securities market and embraces all form of lending and borrowing the capital market comprises the complex of institutions and mechanisms through which intermediate term funds and long term funds are pooled and made available to business, government and individuals. The capital market also encompasses the process by which securities already outstanding are transferred.
The money market refers to the market where borrowers and lenders exchange short term funds to solve their liquidity needs. Money market instruments are generally financial claims that have low default risk maturities under one year and high marketability.
10) Carrot and stick bond:-
In Carrot and Stick Bonds, carrot is the lower than normal conversion premium i.e. the premium over the present market price of the equity shares is fixed at a reasonable level so that the price of the equity shares need not increase significantly to make conversion practical. The stick is the issuer’s right to call the issue at a specified premium if the price of the equity shares is traded above a specified percentage of the conversion price.
11) Basket trading system:-
The Bombay Stock Exchange provides the investors as well as its member brokers a facility of Basket Trading System, with a view to provide investors the facility of creating sensex linked portfolio and also to create a linkage of market prices of the underlying securities of sensex in the cash segment and futures on sensex. In this system the investors through the member brokers of the exchange are able to buy or sell all 30 scrips of sensex in one go in the proportion of their respective weights in the sensex. The investors can also create their own baskets by deleting certain scripts from 30 scripts in the sensex.
12) Employees stock option:-
Employee Stock Option means the option given to the whole-time directors, officers or employees’ of a Company which gives them the right to purchase or subscribe at a future date the securities offered by the company at a pre-determined price. Employee stock option plays vital role in rewarding and motivating employees in attracting and retaining the best talent in the company.
13) Collective investment scheme:-
Collective Investment Scheme (CIS) under SEBI (Collective Investment Schemes) Regulations, 1999 means any scheme or arrangement made or offered by any company under which:
(a) The contributions, or payments made by the investors, by whatever name called, are pooled and utilized solely for the purposes of the scheme or arrangement.
(b) The contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement.
(c) The property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; and
(d) The investors do not have day-to-day control over the management and operation of the scheme or arrangement.
The CIS Regulations, however, excludes any scheme or arrangement made or offered by a co-operative society, deposits accepted by non-banking financial companies; contract of insurance; deposits accepted under section 58A of the Companies Act, 1956 etc.
14) Ombudsman in stock market:-
“Ombudsman” means any person appointed under regulation 3 of SEBI (Ombudsman) regulations, 2003 and unless the context otherwise requires, includes stipendiary Ombudsman. Regulation 2(n) of the Regulations defines stipendiary ombudsman as a person appointed under Regulation 9 for purpose of acting as Ombudsman in respect of a specific matter or matters in a specific territorial jurisdiction and for which he may be paid such expenses, honorarium, sitting fees as may be determined by the board from time to time.
An Ombudsman has crucial role to pay in redressal of investors grievances. Any person who has a grievance against a listed company or any intermediary relation to the of the matters specified in SEBI (Ombudsman) regulations may himself or through his authorized representative or any investors association recognized by SEBI, make a complaint to the ombudsman within whose jurisdiction the registered or corporate office of such listed company or intermediary is located. If SEBI has not notified any Ombudsman for a particular locality or territorial jurisdiction, the complainant may request the Ombudsman located at the Head Office of the SEBI for forwarding his complaint to competent jurisdiction. The powers and functions of Ombudsman have also been defined under the said Regulations.
15) Exchange Traded Funds:-
Exchange traded funds ETFs represent a basket of securities that are traded on an exchange. They are similar to index mutual funds but are traded more like a stock. They are a rapidly growing class of financial products and are typically organized as unit trusts. ETFs can be bought and sold throughout the trading day, allowing for intraday trading-which is rare with mutual funds. Unlike mutual funds ETFs do not trade necessarily at the net asset values of their underlying holdings, meaning an ETF could potentially trade above or below the value of underlying portfolios.
16) Central Listing Authority:-
Regulation 3 of sebi (Central Listing Authority) Regulations prescribes for the establishment of an authority to be called the “central listing authority” with the functions delegated to it by SEBI. It provides that the head office of the authority is to be located in Mumbai. However, the authority may, with prior approval of SEBI, establish such branch or regional officers as may necessary the authority has been empowered to perform the following functions:-
1) To receive and process application for letter precedent to listing from applicants and issue, if it is deems fit, a letter precedent to listing to any such applicant
2) To make recommendations to SEBI on issue pertaining to the protections of the interest of the investors in securities and development and regulation of the securities market, including the listing agreements, listing conditions and disclosers to be made in offer documents.
3) To undertake any other functions as may be delegated to it by SEBI from time to time.
17) Electronic Data Information Filing and Retrieval System:-
This is an automated system for filling, retrieval and dissemination of time sensitive corporate information, which till now were being filed physically by the listed companies with the stock exchanges in India. By centralizing the information through on-line filing, EDIFAR’s primary objective is to centralize the information and accelerate its dissemination and doing so enhance the transparency and efficiency for the benefit of all the stake holders in the securities market.
18) Qualified Institutional Buyers:-
QIB are “Qualified institutional Buyers”. According to the SEBI (Disclosers and investor protection) guidelines, 2000 following are the QIBs
· Public financial institutions as defined in section 4A of the companies Act, 1956
· Scheduled commercial banks
· Mutual funds
· FII registered with SEBI
· Multilateral and bilateral development financial institutions
· Venture capital funds
· Foreign venture capital investors
· SFCs
· Insurance companies registered with IRDA
· Provident funds with minimum corpus of Rs 25 crores
· Pension funds with minimum corpus of Rs 25 crores
These entities are not required to registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in the primary issuance process.
19) Money at Call and Short notice:-
Money at call is outright money. Money at short notice is for maturity of or up to 14 days. Money for higher maturity is know as inter-bank deposits. The participants are banks and all India financial institutions are permitted by RBI. From April 1991, corporate with specified minimum lendable resources for transaction have also been permitted to lend in the market through DFHI.
The market is an over-the-telephone market. Non-bank participant at as lenders only. Banks borrow for a variety of reasons to maintain there CRR, to meet heavy payments (ex: withdrawals by customers for payment of taxes), to adjust their maturity mismatch etc. there are days of heavy borrowings on these occasions. Consequently depending upon supply, interest rates show wide fluctuations. Corporate treasury management is not as sophisticated as in industrialized countries and through the cash credit system transfers their liquidity management to their banker who in turn resorts to the call money market.
20) Commodity Bonds:-
Commodity bonds are bonds issued to share the risk and profitability of the future commodity prices with the investors. For example petro bonds, silver bonds, gold bonds and coal bonds A petro bonds may carry a fixed rate of interest with part of the face value of the bonds denominated in barrels of oils. There would be a floor in the face value of the bond. In view of the upside profit potential in oil prices the interest rate could be lower than market rate of interest these bonds may be issued decontrolled items
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