Role of DFHI in Money Market

Presented By:

Manish Gupta, Shruti Kapoor, Rakesh, Sachin, Rahul.

DFHI ( Discount And Finance House of India)

• Why DFHI is formed ?

The Vaghul Committee had endorsed the recommendations for banking commission in 1972 and Chore committee in 1980 regarding setting up specialised institutions as a autonomous financial Intermediary, for developing the money market and provide liquidity to the instruments.

DFHI ( Discount And Finance House of India)

• It was incorporated on March, 1988 under “The Companies Act, 1956”. According to Companies Act, DFHI became the subsidiary of SBI.

• DFHI commenced its operations on April, 1988.

• As on 12 August, 2010, the SBI Bank has invested during the quarter further amount of Rs.37.64 crore in SBI DFHI Ltd. increasing their shareholding to 62.49%.

Resources of DFHI Ltd.

1. The paidup capital of Rs. 200 crores contributed jointly by RBI, Public Sector Banks and all India Financial Institutions in the proportion of 5:3:2.

2. The authorized capital of the company is Rs 250 crores.

3. Refinance facility of different types from the RBI against the collateral of instruments it deals in.

4. Line of credit from banks on a consortium basis of Rs. 100 Crore from 28 public sector banks.

Objectives of DFHI in Money Market

• The main objective of increasing the transaction in or turnover of the money market assets.

• To facilitate the smoothening of the short term liquidity imbalance by developing an active money market and integrating the various segment of money market.

• Facilitate money market transaction of small and medium sized institutions that are not regular participants in the market.

• To promote secondary market in short term money market instruments i.e. to be an active trader in money market instruments rather than a mere repository, and thereby, impart improved liquidity to short term money market instruments.

Money Market Instruments in which DFHI Deals

DFHI deals in the following instruments / products:

• Treasury Bills • Government Securities • Certificates of Deposit • Commercial Papers • Call (overnight) Money, Notice money and Term Money• Interest rate swaps/Forward rate Agreements.

Roles of DFHI in Money Market

• To discount, purchase & sale treasury bills, trade bills, bills of exchange, commercial bills and commercial papers.

• To play an important role as a lender, borrower or broker in the Inter-Bank call Money Market.

• To promote and support company funds, trusts and other organization for development of short term money market.

Roles of DFHI Cont…

• To advise government, banks And financial institutions in evolving schemes for growth and development of money market.

• It mobilizes funds/resources from Commercial or Cooperative banks, FI and Corporate Entities which are pooled and lend the money market.

• Help the corporate entities, banks and FI to raise shirt term money and invest short term surplus.

Roles of DFHI Cont.

• It stabilize the call and short term deposit rate through larger turnover.

• It extend repos, buy back facility to 14 days to banks and FI In money market instruments.

• Two regular quotes – Bid and offer in money market instruments provided by DHFI serve as a base to broaden the secondary market and give an assured liquidity to the instruments.

SBI DFHI Ltd. Offers:

• SBI DFHI Invest - G-Sec., State Dev. Loans, T-Bills.

• SBI DFHI Invest Plus – Bank CDs, Corp. CPs., Corporate Bonds

• SBI DFHI Money - ICD• SBI DFHI Trade – High yield G-Sec.

Who Can Deal With SBI DFHI Ltd.

• Individuals

• Corporate

• Regional rural banks

• Cooperative Banks

• Provident Funds, Pension Funds, Gratuity Funds

• Trusts

• Insurance Companies

• Mutual Funds

• Banks

Conclusion

• With own reference and support from RBI in refinance facility and broad based money instruments, DFHI is poised for continued sustained growth and more effective role to fulfill the basic objective of the money market i.e to facilitate smoothening of short term liquidity.

Bibliography

• www.sbidfhi.com• www.icai.org• www.investopedia.com• www.businessfinance.com• www.wikipedia.com