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KARNATAK UNIVERSITY

DHARWAD

KOUSALI INSTITUTE OF MANAGEMENT STUDIES

REPORT ON

Discount and Finance House Of India Limited

SUBMITTED BY

SHASHIKALA B G

MBA09001041

SUBMITTED TO:

Dr. N Maruti Rao

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Discount And Finance house of India Limited:

Introduction:

Discount and Finance House of India Ltd. (DFHI), a unique institution of its kind, was set up in

April 1988. The discount has been established to deal in money market instruments in order to

provide liquidity in the money market. Thus the task assigned to DFHI is to develop a secondary

market in the existing money market instruments.

The share capital of DFHI is Rs 200 crores, which has been subscribed by Reserve Bank of India

(10.5%), Public sector banks (62%) and Financial Institutions (26.6%).

The main objective of DFHI is to facilitate the smoothening of the short term liquidity

imbalances by developing an active money market and integrating the various segments of the

money market.

Who can deal with DFHI:

Individuals

Corporate

Regional rural banks

Provident fund, pension funds, gratuity funds

Trusts

Insurance companies

Mutual funds

Banks

Who have Demat account with a Depository Participant or CSGL account with SBI DFHI / any

Bank or Primary Dealer

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T he Functions of DFHI:

y To discount and rediscount, purchase and sell treasury bills, trade bills of exchange,

commercial papers.

y To play an important role as a lender borrower or broker in the interbank call moneymarket.

y To promote and support company funds and other organizations for the development of

short term money market.

y To advise government banks and financial institutions in evolving schemes for growth

and development of money market.

y The DFHI participates in the call, notice and term markets as a borrower and as a lender.

S ervices provided by DFHI are:

y Dealing in 91 days and 364 days Treasury Bills

Treasury bills are issued by Reserve bank of India on behalf of the Government of India.

Such bills are sold at fortnightly auctions. The Discount House regularly participates in

such auctions. Moreover, it provides a ready market to other institutions/individuals to

buy or sell the Treasury Bills.

y Re-discounting short term commercial bills.

The Discount House aims at imparting liquidity to Commercial bills which have already

been discounted by banks and financial institutions. It further re-discounts them and also

enables banks and other institutions to re-discount from it such bills. For this purpose

DFHI announces its bid and offers re-discount rates on a fortnightly basis.

y Call Money Market and Term Deposit:

DFHI has been permitted by the Reserve bank of India to operate in the inter-bank call

money market, both as lender and borrower of overnight call and notice money up to 14

days. DFHI also renders service to banks in the call money market by arranging or placing funds for banks.

y Dealing in Commercial Paper and Certificate of deposits.y Government dated Securities

It also provides platform for the trading of G-securities

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O bjectives of DFHI:

y To even out the liquidity imbalances in the banking system i.e., to balance the demand

and supply for short term finance in the money market.

y To promote secondary market in short term money market instruments i.e. to be an activetrader in money market instruments rather than a mere repository, and thereby, impact

improved liquidity to short term money market instruments.

y To integrate markets at regional centers with the main market at Mumbai, through its

network.

y Provide safe and risk free short term Investment Avenue to institutions.y Facilitate money market transactions for small and medium sized institutions who are not

regular participant in the market.y DFHI provides the Constituent Subsidiary General Ledger Account facility which

enables even those entities which otherwise do not have an SGL account facility with the

RBI to reap the benefits of investing in government securities.

P roducts:

Treasury bills

Dated govt. securities

Certificate of deposits

Commercial papers

Call (overnight) money

Notice money

Term money

Derivative Usance promissory notes of commercial banks

Ready Forward Contracts (Repos)

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P erformance:

RBI promoted Discount & Finance House of India (DFHI) and SBI Gilts Ltd, a subsidiary of

Indias largest commercial bank. It is a market leader in the Primary Dealer segment of the

domestic debt market, with a Net Worth of Rs.1109.89 crores (as on 31st March 2010) and a presence in all major financial centers of the country.

It posted an impressive total outright turnover of Rs.68,735 crores in Government

Securities/SDL and Rs.10,176 crores in Treasury Bills respectively.

As Primary Dealers, SBI DFHI trade in Fixed Income Securities (Treasury Bills, Government

securities, State Development Loans, Corporate Bonds) and Short Term Money Market

instruments (Certificates of Deposit, Commercial Paper, Inter- Corporate Deposits, Call &

Notice Money Deposits).

SBI DFHI Ltd, is an active player in the both the primary and the secondary market for Treasury

Bills with an impressive total outr.ight turnover of Rs.10,176 crores.