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Introduction Of The Topic
Financial market
•Financial markets are the centers or arrangements facilitating buying and selling of financial claims, assets, services and securities. Banking and non-banking financial institutions, dealers, borrowers and lenders, investors and savers, and agents are the participants on demand and supply side in these markets. Financial market may be a specific place or location. E.g. stock exchange or it may be just an over-the-phone market.

Capital Market
The capital market is the market for securities, where companies and governments can raise long-term funds. It is a market in which money is lent for periods longer than a year. The capital market includes the stock market and the bond market. Financial regulators, such as the U.S. Securities and Exchange Commission (SEC), oversee the capital markets in their designated countries to ensure that investors are protected against fraud.

Money Market
The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend. Participants borrow and lend for short periods of time, typically up to thirteen months. Money market trades in short-term financial instruments commonly called "paper." This contrasts with the capital market for longerterm funding, which is supplied by bonds and equity. Money Market provides the channel through which suppliers of temporary cash surpluses meet demanders of temporary cash deficits. Money market is one of the most efficient markets in the world. This means underpricing and over-pricing will be wiped out almost instantaneously.


Money market Instruments
a) T-bills b) Certificate Of Deposit (CD) c) Commercial papers d) Banker's Acceptance e) Eurodollars f) Repos g) Large CDs ( $100k) h) Fed funds borrowings and repose

Operations in Call Market
•Borrowers and lenders contact each other over telephone. •The borrowers and lenders arrive at a deal specifying the amount of loan and the rate of interest. •After the deal is over, the lender issues FBL cheque in favour of the borrower. •The borrower in turn issues call money borrowing receipt. •When the loan is repaid with interest, the lender returns the duly •discharged receipt. •The deal can be directly negotiated by routing it through the Discount and Finance House of India (DFHI).

Entry Barrier
•The entry into this field is restricted by RBI. •Commercial Banks, Co-operative Banks and Primary Dealers are allowed to borrow and lend in this market. •Specified All-India Financial Institutions, Mutual Funds, and certain specified entities are allowed to access to Call/Notice money market only as lenders.

Importance of Money Market
•Development of trade & industry. •Development of capital market. •Smooth functioning of commercial banks. •Effective central bank control. •Formulation of suitable monetary policy. •Non inflationary source of finance to government

Characteristic features of a developed money Market
•Highly organized banking system •Presence of central bank •Availability of proper credit instrument •Existence of sub-market •Ample resources •Existence of secondary market •Demand and supply of fund

Recent development in Money Market in india
•Integration of unorganized sector with the organized sector •Widening of call Money market •Introduction of innovative instrument •Offering of Market rates of interest •Promotion of bill culture •Entry of Money market mutual funds •Setting up of credit rating agencies •Adoption of suitable monetary policy •Establishment of DFHI •Setting up of security trading corporation of India ltd. (STCI)

•The report on recommendations, made after a careful study of the money market and the role of money in money market. •Market funds play in that market; have been designed to further strengthen an already resilient product. •Our proposals for explicit liquidity standards, shorter portfolio maturities, improved credit analysis. •A better understanding of a fund’s client base and more disclosure should better enable money market funds. •To withstand the next period of severe market instability. We also recognize the important role that the government plays in overseeing the marketplace as a whole, and pledge to work with appropriate federal officials to implement a regime for nonpublic reporting and monitoring by institutional investors in the money market.