Financial Management and Business Data Analytics · Money Market

Money Market Mutual Funds, CBLO and TREPS Explained

Updated 10 October 2026 · Fact-checked

A money market mutual fund pools investor money and invests it in short-term debt such as treasury bills, commercial paper and certificates of deposit. CBLO, now replaced by TREPS, is a collateral-backed overnight lending and borrowing platform run by CCIL. To answer questions, state the meaning, maturity, issuer, risk and liquidity.

Understand Money Market Mutual Funds and Other Instruments

The money market deals in short-term funds, generally up to one year. Instruments here are highly liquid, low in risk and traded in large amounts. Banks, mutual funds, corporates and the government use it to manage day-to-day cash.

A money market mutual fund (MMMF) lets small investors reach this market. You buy units of the fund. The fund manager invests the pool in treasury bills, commercial paper, certificates of deposit, call money and similar paper. Under SEBI's mutual fund rules, a money market fund invests in instruments with maturity up to one year. Returns are not guaranteed. They depend on the interest earned and on price changes in the portfolio. Because the paper is short-dated and mostly of high credit quality, the risk is low compared with long-term debt or equity funds, but it is not zero.

CBLO (Collateralised Borrowing and Lending Obligation) was a money market instrument created by the Clearing Corporation of India Ltd (CCIL) with RBI approval. It let members who were restricted or shut out of the call money market borrow and lend against collateral, mostly government securities. A borrower pledged securities and received funds for a fixed period, often overnight. CCIL guaranteed settlement. In November 2018 CCIL replaced CBLO with TREPS (Tri-Party Repo). Here CCIL acts as the tri-party agent. It selects and values the collateral and manages settlement. The idea remains the same: secured short-term lending and borrowing.

Other short-term instruments include repo and reverse repo. In a repo, one party sells securities and agrees to buy them back later at a higher price. The difference is the interest cost. A reverse repo is the same deal seen from the lender's side. Also in this family are call and notice money, treasury bills, commercial paper, certificates of deposit and commercial bills.

For exams, compare instruments on a few points: who issues or borrows, maturity, whether it is secured, who can invest, and how liquid it is.

Key rules to remember

Repo interest cost: Repurchase price = Sale price + (Sale price × Repo rate × Days ÷ 365); Interest is the repurchase price minus the sale price. Use the day-count the question gives. Many Indian money market questions use 365 days.
Discount instrument yield (simple annualised): Yield = [(Face value − Purchase price) ÷ Purchase price] × (365 ÷ Days to maturity) × 100; Use for treasury bills, commercial paper and certificates of deposit issued at a discount. The base is the price paid, not the face value.
Net asset value per unit: NAV = (Market value of fund assets − Liabilities) ÷ Number of units outstanding; Use this to value MMMF units. The purchase and sale of units happens at NAV, subject to any load.
Key features to recall: MMMF: maturity up to 1 year | CBLO replaced by TREPS in 2018 | Collateral: mainly government securities; These are definitions to state, not calculations.

How to solve Money Market Mutual Funds and Other Instruments questions

Use this approach for both theory and numerical questions on money market funds and short-term instruments.

1Identify what is asked: a definition, a comparison, a feature list or a calculation.
2Name the instrument and state its meaning in one clear line, with the issuer or platform operator.
3Give the core features: maturity, security or collateral, participants, liquidity and risk.
4For CBLO or TREPS, mention the role of CCIL, collateral and the 2018 replacement.
5For a calculation, write the formula first, then substitute values with the correct number of days.
6Show the interest or yield step separately, then state the final answer with units and a one-line interpretation.
7For comparison questions, use a short point-by-point layout covering issuer, maturity, security and liquidity.

Quickest way: Four-point instrument checklist

When to use it: Use this for MCQs and short-note questions where you must recognise or describe an instrument fast.

Ask: is it a fund (MMMF), a secured borrowing platform (CBLO or TREPS), or a paper (T-bill, CP, CD)?
Match the maturity: all are short-term, generally up to one year, and overnight for TREPS and call money.
Check security: TREPS and repo are collateralised; CP is unsecured and CD is a bank deposit instrument.
For yield, use the price paid as the base and annualise with 365 ÷ days.

Common mistakes in Money Market Mutual Funds and Other Instruments

Saying CBLO is still the current platform.
Older notes and books still describe CBLO.
Fix: Write that CBLO was replaced by TREPS in 2018 and describe both, with CCIL as operator.
Calling a money market mutual fund risk-free or return-guaranteed.
Short maturity and good credit quality make it feel like a bank deposit.
Fix: Say the risk is low, not nil. Returns depend on interest earned and portfolio price changes, and credit or interest rate risk still exists.
Using face value as the base when computing yield on a discount instrument.
Students confuse discount rate with yield.
Fix: Divide the gain by the purchase price, then annualise.
Treating a repo as a plain sale of securities.
The first leg looks like a sale.
Fix: Remember the agreement to buy back. Treat the price difference as interest on a secured loan.
Mixing a money market fund with a liquid fund or a debt fund when listing features.
All invest in debt and the names sound alike.
Fix: Anchor on the money market fund's investment in money market instruments of up to one year maturity, and state this clearly.

Worked examples

Example 1

A company sells government securities worth ₹50,00,000 under a repo for 10 days at a repo rate of 7.3% per annum. Calculate the repurchase price. Use 365 days.

Show the solution

Interest = 50,00,000 × 7.3% × 10 ÷ 365.
50,00,000 × 0.073 = 3,65,000.
3,65,000 × 10 ÷ 365 = 10,000.
Repurchase price = 50,00,000 + 10,000 = 50,10,000.

Answer: The repurchase price is ₹50,10,000, so the interest cost is ₹10,000.

Example 2

A mutual fund holds a 91-day commercial paper bought at ₹97,500 with face value ₹1,00,000. Find the annualised simple yield using 365 days.

Show the solution

Gain = 1,00,000 − 97,500 = ₹2,500.
Return for the period = 2,500 ÷ 97,500 = 0.025641, or 2.5641%.
Annualising factor = 365 ÷ 91 = 4.010989.
Yield = 0.025641 × 4.010989 = 0.102847.
Convert to a percentage: about 10.28%.

Answer: The annualised simple yield is about 10.28% per annum.

Exam tips

Write TREPS and CBLO together in definition answers. Mention CCIL and collateral to earn full marks.
In MCQs, watch for options that call a money market fund guaranteed or long-term. Reject them.
In numericals, state the day-count basis you use if the question does not give one.
For comparison questions, use a short list of points rather than a long paragraph.
Revise treasury bills, commercial paper and certificates of deposit with this topic, since questions often mix them.

Practice questions from Money Market

Money Market Mutual Funds and Other Instruments in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Money Market Mutual Funds and Other Instruments: frequently asked questions

What is a money market mutual fund?

It is a mutual fund that invests in short-term money market instruments such as treasury bills, commercial paper and certificates of deposit. You buy units at NAV. Returns are not guaranteed, though risk is generally low.

What is the difference between CBLO and TREPS?

CBLO was a collateral-backed borrowing and lending instrument run by CCIL. TREPS replaced it in 2018. In TREPS, CCIL acts as a tri-party agent that manages collateral selection, valuation and settlement.

Which instruments are part of the Indian money market?

Common instruments are treasury bills, call and notice money, commercial paper, certificates of deposit, commercial bills, repos and TREPS. Money market mutual funds give investors indirect access to these.

Is a money market mutual fund safe?

It is relatively low risk because it holds short-dated, mostly high-quality paper. It is still not risk-free. Interest rate changes and credit events can affect returns.