Supply of Money

M1 =
Coins +Currency Notes + Cash with
banks +Other deposits with RBI

M2 =
M1+ Post office savings deposits
M3 =
M1 + Time deposits with commercial
banks and co-op banks

M4 =
M3 + Total Post Office Deposits
 Money market
• The Centre for dealing mainly short term
monetary assets, it meets the short term
requirements of borrowers and provides
liquidity or cash to lenders
• Money market is a collective name given
to the various forms and institutions that
deal with the various grades of near
money.
 Functions of Money market

• Provides various kinds of credit

instruments suitable and attractive for
different sections and helps in augmenting
the supply of funds.
• The efficient working of the money market
minimizes the gluts and stringencies in the
money market as there is seasonal
fluctuation in the demand for money
• It helps in the seasonal fluctuation of rate
of interest
• Enhances liquidity in the market.
• Provides profitable investment
opportunities to financial institutions to
invest their funds.
 Structure of Indian Money Market
• Organized and unorganized
• Organized
• RBI
• Commercial Banks
• Post office Savings banks
• Non Banking Companies
• Co-operative Banks
• RRBs
• Commercial Banks
– Scheduled and
– Public Sector Banks
State Bank of India Group ( 1 +7)
Nationalized Commercial Banks – ( 27)
Regional Rural Banks
- Private Sector Banks
Indian and Foreign Banks
– Non Scheduled Banks
• Unorganized
– Indigenous Banks
– Money Lenders
1. Call Money Market
2. Collateral Loan Market – loans against
collateral securities like stocks and bonds
3. Bill market
a) Bill of Exchange
b) Treasury bills
• Certificate of Deposits
– Issued by scheduled commercial banks in
multiples of Rs25 lakhs.
– Minimum size – Rs. 1 crore
– Maturity in 3 months to 1 year
– Issued at discount
– Freely transferable
• Commercial Papers
– Issued by listed companies with a net
worth of Rs 10 Cr.
– And working capital not less than Rs 25 cr.
– Issued in multiples of Rs.25 lakhs.
– Maturity 3 months to 6 months
– Freely transferable