Money market



 Financial institutions have been employing money market instruments to finance the short-term monetary requirements of industries such as agriculture. .  The money markets have performed well in the past 20 years.  After the globalization initiative in 1992.  The Reserve Bank of India (RBI) has been playing the key role of regulator and controller of such money markets. India has witnessed a growth in its money markets.Introduction  The money market is a monetary system of lending and borrowing of short-term funds. finance and manufacturing.

e. • In Money Market transaction can not take place formal like stock exchange. acceptance & bill market. acceptance houses & NBFC (Non-banking financial companies). it comprises of several submarket like call money market. It is a wholesale market & the volume of funds or financial assets traded are very large i. relevant document and written communication transaction can be done.relationship & free movement of funds from one sub-market to another. in crores of rupees. The sub markets have close inter. • The component of Money Market are the commercial banks. • It is not a single homogeneous market. only through oral communication. • • .FEATURES OF MONEY MARKET • Transaction have to be conducted without the help of brokers.

 Government to raise short term funds to meet its deficits .Function of money market  It facilitates economic development as short term funds are provided to the industry and other sectors.  It provides avenue for short term investment opportunities to investors.  It helps the banks to maintain financial discipline  It facilitates proper implementation of monetary policy of RBI  Encourages savings and investment  Control inflation because RBI reduces money supply by increasing the repo rate and cash reserve ratio.

Non inflationary source of finance to government. Encourage Economic Growth Formulation of suitable monetary policy.Importance of Money Market • Financing industry & trade • Smooth function of commercial • • • • banks. Proper allocation of resources .


thus plays an important role in developing and stabilizing the money market . DFHI(DISCOUNT FINANCE HOUSE OF INDIA)-It is jointly owned by RBI. BANKS-It has a major impact and influence on the interest rate structure and liquidity position FINANCIAL INSTITUTIONS-They undertake lending and borrowing of short term funds . GOVERNMENT-This is most active player and a largest borrower in money market. It deals in money market instruments and also government securities.. They transact in large volumes. It issues T-bills and other government securities to raise funds for government.Public sector banks and all financial institutions. It participates in repo operations.Organized sector  RBI-Its is the most important player in Indian money     market. It ensures liquidity to facilitate economic growth and price stability.

Their services are prompt. They are intermediaries between lenders and borrowers .They are known by different names like Multans .Unorganized sector  INDIGENOUS BANKS-It is a financial intermediary that operates as banks by receiving deposits giving loans and dealing in hundies. shroffs etc.  MONEY LENDERS-The money lenders deal in business of lending money at very high rate of interest for unproductive purpose. informal and flexible  NIDHIS & CHIT FUNDS-Chit funds are saving institution where in members make regular contribution to the fund whereas Nidhis are mutual funds at a reasonable interest rates.  BROKERS AND DEALERS-They are found in urban markets.The main advantage is simple and flexible operations.

commercial papers call money market.etc . bankers acceptance.MONEY MARKET INSTRUMENTS  Money market instrument provides the borrowers to fulfill their short term needs and gives the liquidity which is needed to lenders  Money market instruments are those which have maturity period of less than 1 year.  The types of MM instruments are treasury bills.

Money lent for one day is called ‘call money’. if it exceeds 1 day but is less than 15 days it is called ‘notice money’. The loans are of short-term duration (1 to 14 days).CALL MONEY MARKET  Call money market is also known as inter-bank Call money     market In the call money market lending and borrowing transactions are carried out for one day. Money lent for more than 15 days is ‘term money’ It is a highly competitive and sensitive market It is basically located in the industrial & commercial location. .

trusts.  The funds cannot be withdrawn on demand but it can be liquidated on payment of a penalty.  Maturity of not less than 7 days and maximum up to a year. COMMERCIAL BILL MARKET • A commercial bill market deals in bills of exchange. corporations.  Transferable by endorsement.  It may be a demand bill .  Issued to individuals.  In India the commercial bill market is highly underdeveloped.CERTIFICATE OF DEPOSITS  A CDs is a short term borrowing note like promissory note in the form of certificate. funds and associations.  The commercial bills are purchased and discounted by commercial banks and are rediscounted by FIs.  FIs are allowed to issue CDs for a period between 1 year and up to 3 years  CDs are issued at discount to face value and discount rate is market determined. • This bills can be domestic bills or foreign bills of exchange.

Banks. Can be issued in the physical form (Usance Promissory Note) or demat form. corporations and foreign governments commonly use this type of funding. 5 lacs after that Maturity is 7 days to 1 year CP is very safe investment because the financial situation of a company can easily be predicted over a few months. Blue-chip companies issue CPs to obtain short term funds from money market Issued minimum of Rs. 5 lacs and in the multiple of Rs.COMMERCIAL PAPERS  It is a short term unsecured promissory      note issued by corporates and financial institutions at a discounted value on face value. .

Reforms in money market  Deregulation of the Interest     Rate Money Market Mutual Fund (MMMFs) : Establishment of the DFI : Electronic Transactions Development of New Market Instruments : .

725 crore in 2006-07.Development in money market  Money market denotes inter-bank market where the banks borrow and lend among themselves to meet the short term credit and deposit needs of the economy. 35.  The unexpected nature of the call money market led to the activation of the Treasury Bills market to reduce dependence on call money. .144 crore in 2001-02 to Rs.  Emergence of market repo and collateralized borrowing and lending obligation (CBLO) instruments  Turnover in the call money market declined from Rs.170 crore in 2004-05 before rising to Rs. 14. 21.

Disadvantage of Money Market • Absence of Integration • Multiple rate of interest • Insufficient Funds or • • • • Resources Shortage of Investment Instruments Shortage of Commercial Bill Lack of Organized Banking System Less number of Dealers .

 So this market this very much needed for the financial institutions to meet the need of short term debt in the market. . It is a short term market where the liquidity is very high. It mobilizing the financial assets in the various sectors and traded by the banks and other financial intermediaries.conclusion  Lastly concluded that the Indian money market plays a vital role in the Indian financial system.  This market regulates by the primary dealers where the STCI & SBIDFHI plays a pivotal role.  The government securities are traded in a short term period. These institution regulates the market.  http://www.html http://kalyan-city.html     features-drawbacks.bibliography  http://www.htm  http://kalyan-city.

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