Money Market Instruments Explained: What Every TIRM Candidate Must Know in 2025-2026

Why Money Market Instruments Are the Heart of the TIRM Paper

If you are preparing for the IIBF Treasury and Investment Risk Management (TIRM) exam, there is one chapter you simply cannot afford to treat lightly — and that is Money Market Instruments. Every single year, this topic contributes a significant chunk of questions in the treasury paper, and candidates who have a crisp, conceptual understanding of these instruments invariably score better than those who have only memorized definitions.

Think about it from a banker’s perspective. Treasury desks in banks deal with money market instruments every single working day. Whether it is parking surplus funds overnight, managing short-term liquidity, or complying with RBI’s statutory requirements — money markets are the first port of call. When you understand how these instruments actually work in practice, the exam questions feel like familiar territory rather than alien concepts.

In this article, we are going to walk you through every major money market instrument, the mechanics behind each, their regulatory framework under RBI, the latest 2025-2026 developments you absolutely need to carry into the exam hall, and a ready-reference summary table that will make revision easy. Let us begin.

What Is the Money Market? Setting the Foundation Right

The money market is the segment of the financial market where short-term borrowing and lending of funds takes place — typically for maturities of one year or less. The primary purpose of the money market is to provide liquidity to participants and to enable the transmission of monetary policy by the Reserve Bank of India.

Key participants in the Indian money market include the Reserve Bank of India (as the regulator and market maker), scheduled commercial banks, primary dealers, mutual funds, insurance companies, corporates, and non-banking financial companies. Each of these players uses money market instruments either to raise short-term funds or to deploy surplus liquidity profitably.

For your Risk Management and TIRM preparation, you should internalize this basic principle: money market instruments are wholesale, institutional instruments characterized by high safety, high liquidity, and relatively lower yields compared to capital market instruments. Now let us examine each instrument one by one.

Treasury Bills (T-Bills): The Sovereign Benchmark

Treasury Bills are short-term debt instruments issued by the Government of India through the Reserve Bank of India. They are zero-coupon instruments, meaning they are issued at a discount to face value and redeemed at par. The difference between the issue price and the face value represents the return to the investor.

Types of Treasury Bills

• 91-Day T-Bills: Auctioned every week on Wednesdays. These are the most liquid and frequently traded T-Bills in the Indian market.
• 182-Day T-Bills: Auctioned every alternate Wednesday. These serve the medium short-term liquidity needs of participants.
• 364-Day T-Bills: Auctioned every alternate Wednesday. These are the longest maturity T-Bills and often serve as a benchmark for short-term interest rates.

T-Bills are issued through a uniform price auction (for 91-day) and multiple price auction (historically), but since 2021, RBI has largely standardized the auction methodology. The minimum bid amount is Rs. 10,000 and in multiples thereof. T-Bills are eligible for Statutory Liquidity Ratio (SLR) purposes, which makes them highly attractive to banks.

For TIRM exam purposes, remember: T-Bills carry zero default risk (sovereign guarantee), are the most liquid money market instruments, and serve as benchmarks for pricing other short-term instruments.

Cash Management Bills (CMBs): The Flexible Sovereign Tool

Cash Management Bills were introduced in 2010 and are a relatively newer addition to India’s money market landscape. CMBs are non-standard, short-term instruments issued by the Government of India to meet its temporary cash flow mismatches. Unlike regular T-Bills, CMBs have maturities of less than 91 days and are issued on an ad hoc basis depending on the government’s immediate cash requirements.

CMBs have the same features as T-Bills — they are zero-coupon, issued at discount, and have sovereign backing. However, their maturities and issuance are irregular. From the TIRM exam angle, understand that CMBs are NOT part of the regular auction calendar and are announced separately. They are also eligible for SLR classification.

Commercial Paper (CP): The Corporate Short-Term Tool

Commercial Paper is an unsecured, negotiable money market instrument issued in the form of a promissory note by corporates, primary dealers, and certain Non-Banking Financial Companies (NBFCs) to raise short-term funds. It allows creditworthy entities to diversify their short-term funding sources away from bank credit.

Key Features of Commercial Paper

• Issuer Eligibility: Corporates with a minimum net worth of Rs. 100 crore, primary dealers, and satellite dealers. NBFCs and All India Financial Institutions can also issue CPs subject to RBI guidelines.
• Maturity: Minimum 7 days, maximum 1 year.
• Credit Rating Requirement: Minimum rating of A3 (or equivalent) from a SEBI-registered Credit Rating Agency. This is mandatory for every CP issuance.
• Denomination: Issued in multiples of Rs. 5 lakh, with a minimum investment of Rs. 5 lakh.
• Nature: Issued at a discount to face value. No collateral is required.
• Issuance Mode: CPs are issued in dematerialized form through registered Issuing and Paying Agents (IPAs), which are typically scheduled commercial banks.

An important exam tip here: CPs being unsecured instruments carry credit risk unlike T-Bills. This is a classic comparison question in the TIRM paper. Also, remember that CP rates are closely linked to the prevailing call money rates and T-Bill yields — a higher call rate environment typically pushes CP rates higher.

Certificates of Deposit (CDs): The Bank’s Short-Term Liabilities

Certificates of Deposit are negotiable, unsecured money market instruments issued by scheduled commercial banks and select All India Financial Institutions against funds deposited with them for a specified period. Unlike a regular fixed deposit, a CD is freely transferable and can be traded in the secondary market, giving it superior liquidity.

Key Features of Certificates of Deposit

• Issuers: Scheduled commercial banks (excluding Regional Rural Banks and Local Area Banks) and select All India Financial Institutions (EXIM Bank, NABARD, NHB, SIDBI) within their specified umbrella limits.
• Maturity: For banks — minimum 7 days, maximum 1 year. For Financial Institutions — minimum 1 year, maximum 3 years.
• Denomination: Minimum Rs. 5 lakh and in multiples thereof.
• Issuance: Issued at a discount to face value (for shorter tenors) or on a coupon basis.
• Form: Issued only in dematerialized form as per RBI directives.

A critical distinction you must carry into your exam: CDs and CPs are similar instruments but differ fundamentally in their issuers. CDs are issued by banks and financial institutions, while CPs are issued by corporates and non-bank entities. This single distinction has featured in many objective questions in the TIRM paper.

Call Money and Notice Money Market

The Call and Notice Money market is the segment where interbank borrowing and lending of funds takes place for very short durations. This market is critical for day-to-day liquidity management by banks.

• Call Money: Overnight borrowing and lending (1 day maturity). Banks with surplus funds lend to banks with deficit funds at the call rate.
• Notice Money: Borrowing and lending for 2 to 14 days. The borrower does not have to give prior notice for repayment — hence the term “notice money” applies when both parties agree on a short window between 2-14 days.
• Term Money: Borrowing and lending for 15 days to 1 year. Less commonly referred to in the basic money market classification.

The call money market is a pure interbank market in India. Only scheduled commercial banks, cooperative banks, and primary dealers are permitted to participate both as borrowers and lenders. Mutual funds, insurance companies, and others can only lend (not borrow) in this market. The call money rate is influenced heavily by RBI’s Repo Rate and forms the operating target of monetary policy.

For your broader treasury preparation, you should also explore our detailed notes on the AFM Exam which covers interest rate risk and duration concepts that connect directly to money market pricing.

Repurchase Agreements (Repos and Reverse Repos)

A Repurchase Agreement (Repo) is a collateralized short-term borrowing mechanism where one party sells securities to another with an agreement to repurchase the same at a specified future date and price. Repos are among the most important money market instruments in any modern financial system, and RBI uses them actively as a monetary policy tool.

Types of Repos in India

• RBI Repo (Policy Repo Rate): Banks borrow from RBI by pledging government securities. This rate is the benchmark borrowing rate and as of early 2025, the RBI Repo Rate stands at 6.25% following the February 2025 MPC cut of 25 basis points.
• RBI Reverse Repo: Banks park surplus funds with RBI. The Standing Deposit Facility (SDF) has effectively replaced the reverse repo as the floor rate since April 2022. The SDF rate is currently 6.00%.
• Market Repos: Bilateral repos between market participants (banks, PDs, mutual funds, insurance companies) collateralized by government securities and other eligible instruments.
• Tri-Party Repos (TREPS): Repos where a neutral third party (CCIL — Clearing Corporation of India Limited) acts as the intermediary, handling settlement and collateral management. TREPS have become the dominant overnight funding instrument in India’s money market, replacing the older CBLO (Collateralized Borrowing and Lending Obligation).

A very important TIRM exam point: CBLO was discontinued in November 2019 and replaced by TREPS. Many candidates still confuse or use the old terminology. Always use TREPS (Tri-Party Repo) in your answers. Also note that eligible collateral for market repos has been expanded by RBI to include corporate bonds, making the repo market broader and deeper.

Latest 2025-2026 RBI Updates You Must Know for the TIRM Exam

Staying current with RBI circulars and policy changes is what separates good candidates from great ones in the TIRM exam. Here are the most critical updates from 2024-2025 that are highly likely to be tested:

1. RBI Repo Rate Reduction — February 2025

The Monetary Policy Committee (MPC) reduced the Policy Repo Rate by 25 basis points to 6.25% in its February 2025 meeting, marking the first rate cut in nearly five years. This signals a shift in the monetary policy stance and directly impacts pricing of all money market instruments. The SDF rate now stands at 6.00% and MSF rate at 6.50%.

2. Liquidity Framework Refinements

RBI has continued to fine-tune its liquidity management framework, using a mix of Variable Rate Repo (VRR) and Variable Rate Reverse Repo (VRRR) auctions to manage systemic liquidity. The use of Open Market Operations (OMO) purchases in 2024-2025 to inject durable liquidity has also been significant. For TIRM candidates, understanding the difference between durable liquidity injection (OMOs) and short-term liquidity management (Repo/SDF) is essential.

3. Revised Guidelines on Commercial Paper (2024)

RBI issued updated operational guidelines emphasizing tighter disclosure norms for CP issuers and stronger due diligence requirements for Issuing and Paying Agents (IPAs). The move is aimed at ensuring better credit transparency in the CP market. Candidates should note that credit rating monitoring has been made more stringent — any rating downgrade below the threshold requires immediate reporting.

4. TREPS Market Deepening

The TREPS (Tri-Party Repo) market volume has consistently crossed Rs. 2-3 lakh crore per day in 2024-2025, cementing its position as the most active overnight money market segment in India. RBI has encouraged more non-bank participation in TREPS to diversify liquidity sources.

5. Digital and Regulatory Reporting Enhancements

RBI’s Centralised Information Management System (CIMS) now captures real-time data on CD and CP issuances, improving market transparency. From 2024, all CD and CP transactions must be reported within stipulated timelines on the reporting platform managed by FIMMDA/CCIL.

For candidates preparing for the TIRM paper alongside CAIIB, our CAIIB Study Material covers treasury and risk concepts in depth and complements your TIRM preparation very well.

Exam Angle: How These Topics Are Tested in TIRM

Let us be practical about the exam pattern. The TIRM paper (Treasury and Investment Risk Management) under IIBF is a case-study and concept-based paper. Money market instruments can appear in the following question formats:

• Direct definition-based questions: “Which money market instrument is issued at a discount by corporates?” (Answer: Commercial Paper)
• Comparison questions: “How does a CD differ from a CP in terms of issuer and maturity?” These are high-scoring questions if you know the distinctions clearly.
• Calculation-based questions: Yield calculation on T-Bills (discount yield vs. money market yield), or computing the effective cost of CP including issuance charges.
• Policy and regulatory questions: Questions on current Repo Rate, SDF Rate, eligible collateral for repos, or the role of CCIL in TREPS.
• Application questions: “A bank has surplus funds for 3 days. Which money market instrument is most appropriate?” These test your understanding of the practical use of each instrument.

Our comprehensive Mock Tests are designed specifically to simulate this exam pattern with updated questions reflecting 2025 RBI changes. We strongly recommend attempting at least 5-6 full-length mock tests before your exam date.

Summary Table: Money Market Instruments at a Glance

Instrument	Issuer	Maturity	Secured / Unsecured	Minimum Amount	SLR Eligible	Key Feature
91-Day T-Bill	Government of India via RBI	91 days	Sovereign (Risk-Free)	Rs. 10,000	Yes	Weekly auction, zero coupon
182-Day T-Bill	Government of India via RBI	182 days	Sovereign (Risk-Free)	Rs. 10,000	Yes	Alternate Wednesday auction
364-Day T-Bill	Government of India via RBI	364 days	Sovereign (Risk-Free)	Rs. 10,000	Yes	Benchmark short-term rate
Cash Management Bills	Government of India via RBI	Less than 91 days	Sovereign (Risk-Free)	Rs. 10,000	Yes	Ad hoc issuance, irregular
Commercial Paper (CP)	Corporates, PDs, NBFCs	7 days to 1 year	Unsecured	Rs. 5 lakh	No	Minimum A3 credit rating required
Certificate of Deposit (CD)	Banks, select AIFIs	7 days–1 year (banks); 1–3 years (FIs)	Unsecured	Rs. 5 lakh	No	Negotiable, transferable FD
Call Money	Interbank (scheduled banks, PDs)	Overnight (1 day)	Unsecured	No fixed minimum	No	Pure interbank, no collateral
Notice Money	Interbank (scheduled banks, PDs)	2 to 14 days	Unsecured	No fixed minimum	No	Short window interbank lending
TREPS (Tri-Party Repo)	Banks, PDs, MFs, Insurers	Overnight to short-term	Secured (Govt Securities)	Varies	No	CCIL as central counterparty
Policy Repo (RBI)	RBI (borrowing by banks)	Overnight	Secured (Govt Securities)	Rs. 1 crore	No	Rate: 6.25% (Feb 2025)

Connecting the Dots: Money Market and Treasury Risk Management

One thing we always tell our students is this — do not study money market instruments in isolation. In the TIRM exam, questions are often framed in the context of treasury risk management, liquidity risk, and interest rate risk. For example, a bank that relies heavily on short-term CDs or CPs to fund its longer-term assets is exposed to refinancing risk and interest rate risk — and that is a classic question framing in this paper.

Similarly, the mark-to-market valuation of T-Bills and the impact of rising interest rates on their portfolio value connects money market instruments directly to the investment portfolio management section of TIRM. Our BFM Exam materials also cover these valuation concepts from a banking perspective, and many of our students preparing for TIRM find the cross-reading extremely valuable.

For candidates who are also looking to build their credit assessment skills alongside TIRM, our CCP Exam preparation resources include detailed coverage of CP issuer credit evaluation that complements your money market understanding.

Quick Revision Tips Before the TIRM Exam

• Always remember the current Repo Rate: 6.25% (effective February 2025) and SDF Rate: 6.00%. These numbers frequently appear in objective questions.
• CBLO is dead — TREPS is the correct current terminology. Using CBLO in your answer will cost you marks.
• For CP and CD comparison, anchor your answer on three differences: issuer, collateral, and SLR eligibility.
• T-Bills are your zero-default-risk benchmark — every other money market instrument carries some degree of credit, liquidity, or market risk over and above T-Bills.
• Understand the RBI’s Liquidity Adjustment Facility (LAF) corridor — MSF (6.50%) at the top, SDF (6.00%) at the bottom, Repo (6.25%) in the middle. This corridor structure is a fundamental concept in Indian monetary policy and treasury management.
• Practice at least 3-4 yield calculation problems on T-Bills — both discount yield and bond equivalent yield formats. These numerical questions are scoring opportunities.

If you are looking for the most updated study resources that incorporate all these 2025-2026 changes, do check out our JAIIB Free PDF 2026 page as well as our dedicated JAIIB Study Material section for foundational banking concepts that support your TIRM preparation.

Final Thoughts: Build Conceptual Clarity, Not Just Memory

We have seen hundreds of TIRM candidates walk into the exam hall with memorized bullet points and walk out disappointed because the paper tested application, not just recall. The money market instruments chapter is deceptively simple on the surface — but the exam rewards those who understand the why behind every feature.

Why is CP unsecured? Because it relies on the issuer’s creditworthiness and short tenure. Why does RBI use TREPS as the operating target? Because it provides a collateralized, transparent, and CCIL-guaranteed mechanism for overnight liquidity. Why are T-Bill rates important even for corporate treasurers? Because they serve as the risk-free benchmark against which all other short-term instruments are priced.

When you approach your preparation with this level of intellectual curiosity — connecting instruments to their real-world function and the regulatory framework around them — the TIRM paper becomes a much more manageable and even enjoyable challenge. That is what great preparation looks like. And that is exactly what we at Learning Sessions are here to help you achieve.

Clear your concepts, practice with updated mock tests, stay current with RBI circulars, and walk into that exam hall with confidence. You have got this.