MONEY MARKET

Presented :
ARUN MAHAJAN
Roll no 05
M.B.A 4th Sem
MONEY MARKET
 In the words of Reserve Bank of India, a money
market is a “Center for dealings, mainly of a short-
term character, in monetary assets; it meets the
short-term requirements of the borrowers and
provides liquidity or cash to lenders. It is the place
where short-term surplus investible funds at the
disposal of the financial and other institutions and
individuals are bid by borrowers, again
comprising of institutions and individuals and also
by the government”.
 CHARACTERISTICS OF MONEY
MARKET
 Money market is basically over-the-phone market. The transactions
are conducted through oral communications. Written
communications and exchange of relevant documents may follow
subsequently.
 Dealing in money market may be conducted with or without the help
of brokers.
 It is a market for short-term financial assets that are close substitutes
for money.
 Short-term for this purpose is generally taken as a period up to one
year.
 Financial assets which can be converted into money with ease,
speed, without loss and with minimum transactions cost are regarded
as close substitutes for money or near money.
 Money market consists of money sub-markets, such as, inter bank
call money, bill rediscounting, treasury bills etc. Collectively, they
constitute the money market.
 IMPORTANCE OF MONEY MARKET
 Money market is an important source of financing trade and
industry through bills, commercial papers, etc. It influences
availability of finances both in the national and international trade.
 Availability of funds in the money market interest rates have an
impact on interest rates and resource mobilisation in the capital
market.
 Money market offers an avenue to the commercial banks for
investing short-term surpluses of funds and borrowing for short-
term needs so as to meet statutory requirements of cash reserve
ratio (CRR) and statutory liquidity ratio (SLR)
 Money market facilitates effective implementation of monetary
policy of the central bank of the country.
 Money market serves as an important guide to the government in
formulating, revising and implementing its monetary policy,
conditions prevailing in money market serve as an indicator of
monetary state of an economy.
FUNCTIONS OF MONEY
MARKET
FINANCING TRADE
FINANCING INDUSTRY

PROFITABLE INVESTMENT

SELF SUFFICIENCY OF COMMERCIAL

BANK
HELP TO CENTRAL BANK

HELP TO GOVERNMENT

ENCOURAGE TO SAVING AND

INVESTMENT
SEGMENTS OF MONEY
MARKET

CALL MONEY MARKET

COLLATERAL LOAN MARKET

ACCEPTANCE MARKET

BILL MARKET