Money Market Mutual Funds: Money Market Mutual Funds are special type of
mutual funds which invest only in high quality money market instruments of shortterm
nature.
The new money market instruments are Certificate of Deposit, the Commercial
Paper, Treasury Bills, etc. Scheduled commercial banks and their subsidiaries are
allowed to set up Money Market Mutual Funds to provide additional short term
avenue to investors and to bring money market instruments within the reach of
individuals and small investors/organisations. Individuals and other bodies are
allowed to invest their money in MMMFs in the form of negotiable instruments and
deposit accounts. The minimum size of investment is ` 1 lakh and repurchases could
be subject to a minimum lock in period of three months. MMMFs are allowed to invest
only in specified short-term money market instruments as lenders. A minimum of
20% of funds should be invested in 182 days Treasury Bills and maximum 20% in the
call and short notice money. The funds mobilised by MMMFs are not subject to
reserve requirements because this funds are in turn invested in money market
instruments. The detailed operating guidelines are framed by the task force of
representatives of banks and the Reserve Bank of India.
3 Comments