Money Market Mutual Funds (MMMFs) are
investment pooling arrangements, which allow
retail participation in money markets through
size intermediation. Sebi (Mutual Funds) Regulations,
1996 define MMMFs as A scheme of a mutual fund
which has been set up with the objective of investing
exclusively in money market instruments. Further,
money market instruments “Include Commercial
Papers (CP), Commercial Bills, Treasury Bills (T-Bills),
Government Securities (G-Sec) having an unexpired
maturity up to one year, call or notice money, Certificate
of Deposit (CD), usance bills and any other like
instruments as specified by the Reserve Bank of India
(RBI) from time to time.”
MMMFs enable retail investors to earn money market
yields, otherwise available only to large and institutional
investors. To illustrate, for the period January 1993 to
March 2003, the yield on 91 days T-bill and average call
money rate (except for short periods) has been higher than
the interest rate offered on savings bank account (Chart 1).1
Retail investors do not have ready access to either
T-bills or call lending. MMMFs make it possible for retail
investors to earn relatively higher yields offered by
money markets. |
