Malaysian money market instruments: from interbank deposits to repos

What is the Malaysian money market?

The money market moves short-term funds between institutions with surplus cash and those that need it. BNM's monetary operations take place in this market: it absorbs or adds liquidity with a range of instruments so that the average overnight interbank rate stays close to the Overnight Policy Rate (OPR). Its counterparties are the approved interbank institutions in the domestic interbank market.

BNM's financial markets portal lists the key participants as financial institutions, Principal Dealers, money brokers, Cagamas, rating agencies, bond pricing agencies, KLIBOR submitters and commodity brokers. Besides the instruments below, short-dated Government and BNM paper trades actively:

• Malaysian Treasury Bills (MTB): Government bills sold at a discount, with original maturities of 3 months, 6 months and 1 year, issued weekly. Malaysian Islamic Treasury Bills (MITB) are the Islamic equivalent.
• Bank Negara Monetary Notes (BNMN) and BNMN-i: BNM's own securities for managing conventional and Islamic liquidity, issued at a discount or with a coupon or profit rate. Only appointed Principal Dealers can bid at BNMN auctions.
• Bank Negara Interbank Bills (BNIB): discount securities issued by BNM that are available and tradable only between licensed banks, with tenures of up to one year. BNIBs are also issued in foreign currency.

What are interbank deposits and placements?

Interbank deposits are unsecured loans of ringgit between banks, from overnight to longer fixed terms. They are the core of the market: the Malaysia Overnight Rate (MYOR) is calculated from unsecured overnight ringgit interbank transactions, and KLIBOR submissions draw on unsecured interbank borrowing and lending and NIDs.

Ringgit interbank deposits use an Act/365 day count. BNM's market conventions set a standard dealing amount of RM10 million for overnight money and RM30 million for terms from one week to one year, for both conventional and Islamic placements. BNM's Financial Stability Review reported average daily unsecured interbank volume of RM6.3 billion between October 2025 and January 2026.

What are negotiable instruments of deposit (NIDs)?

An NID is a deposit evidenced by a negotiable instrument, so the depositor can sell it before maturity. NIDs and bankers' acceptances were introduced in Malaysia in May 1979, and floating rate NIDs (FRNIDs), whose rates reset every three or six months, followed in June 1988. BNM's explanatory notes on NIDs and Islamic Negotiable Instruments (INI) set out how they are issued, traded and settled:

• NIDs can pay a fixed rate, be zero coupon, pay a floating rate, or combine these features. An issuer can issue them at par, at a premium or at a discount.
• INIs are the Islamic equivalent. They include the Islamic Negotiable Instrument of Deposit (INID), based on Mudharabah, and the Negotiable Islamic Debt Certificate (NIDC), based on a sale and buy-back of the bank's assets.
• In the secondary market, NIDs and INIs can be sold outright, bought back by the issuer before maturity, or used in repos and sell and buy back agreements.
• Trades are settled through RENTAS under BNM's rules for scripless securities.

What are bankers' acceptances and Accepted Bills-i?

A bankers' acceptance (BA) is a ringgit bill of exchange drawn on and accepted by a bank in Malaysia to finance trade in goods. BNM's Guidelines on Bankers Acceptances set uniform procedures for creating them and trading them in the secondary market, where they use an Act/365 day count.

Accepted Bills-i (AB-i), previously called Islamic Accepted Bills, are the Shariah-compliant alternative. They use Murabahah (a cost-plus sale) to finance imports and local purchases, and Bai' Dayn (the sale of a trade debt) to finance exports and local sales. At maturity, the holder of a BA or AB-i presents it to the accepting bank for payment, either through PayNet's eSPICK or over the counter for payment through RENTAS.

How do repos and their Islamic equivalents work?

In a repurchase agreement (repo), a seller sells securities at an agreed price and agrees to buy back the same securities at a fixed price on a future date. In practice it is a secured loan, with the securities as collateral. The reverse repo is the same trade seen from the buyer's side.

• Settlement: securities move from the repo seller's account to the buyer's account in RENTAS against payment, on a delivery versus payment basis.
• Pricing: the sale price is based on the market value of the securities, and repo cost is calculated on a 365-day year for ringgit securities.
• Margin: either side can call for margin if the market value of the securities moves away from the repurchase amount.
• BNM's use: BNM uses repos to absorb liquidity, for tenures from overnight to one year, and reverse repos to add liquidity, including lending under its standing facilities.
• Islamic equivalents: a Sell and Buy Back Agreement (SBBA) pairs a sale of assets with a separate promise to buy them back, and Collateralised Murabahah is a Murabahah financing secured by pledged sukuk. Both are used in the Islamic interbank market and with BNM.

What is the Islamic Interbank Money Market?

The Islamic Interbank Money Market (IIMM) started on 3 January 1994, after BNM issued its IIMM guidelines in December 1993. It gives Islamic financial institutions a source of short-term funding and investment based on Shariah principles. Large Islamic payments settle through separate Islamic current accounts at BNM, which keeps conventional and Islamic funds apart at settlement level.

• Mudharabah Interbank Investment (MII): a profit-sharing interbank investment, implemented in February 1996, that lets Islamic banks raise short-term funds.
• Commodity Murabahah Programme (CMP): a commodity-based deposit product, mainly using crude palm oil contracts through platforms such as Bursa Suq Al-Sila'. BNM first auctioned CMP on FAST in March 2007.
• Qard acceptance: BNM's main Islamic liquidity tool, under which Islamic institutions lend surplus funds to BNM, which must repay the same amount.
• Other instruments: GII and MITB, BNMN-i, SBBA, Collateralised Murabahah, AB-i, INI and Islamic private debt securities.

How are money market deals settled?

RENTAS, BNM's Real-time Electronic Transfer of Funds and Securities System, is a multi-currency real-time gross settlement system for interbank funds transfers, a securities settlement system and the scripless depository for all unlisted debt instruments. Monetary operations and tenders run on BNM's Fully Automated System for Issuing/Tendering (FAST).

BNM's market conventions give trading hours of 9.00am to 12.30pm and 2.30pm to 5.00pm. Same-day trades must settle by 5.30pm, and standard (T+1 or T+2) and forward trades by 11.00am on the value date. Settlement after the cut-off on the value date counts as delayed; settlement not made by the close of business counts as failed.

Money market training with Ogos Learning

Money market instruments, settlement calculations and the Islamic money market are core topics in PKMC Module 2 (The Money Market). Ogos Learning offers self-paced e-learning for PKMC Module 2 and Module 4 (Risk Management & Basic Derivatives), and treasury and financial markets training for bank teams. Founder and principal trainer Jin Yoong Chong, CFA, is an HRD Corp accredited trainer who has run accredited CPE courses for capital market licence holders since 2010. He has served as President of the CFA Society Malaysia and authored the PKMC Module 2, 3 and 4 textbooks with AICB.