By: MONIKA SINGLA

MONEY MARKET
• Money market basically refers to a section of the
financial market where financial instruments with
high liquidity and short-term maturities are traded.
• Money market has become a component of the
financial market for buying and selling of securities of
short-term maturities, of one year or less, such as
treasury bills and commercial papers.
Characteristics of a
developed money market.
 A developed commercial banking system.
 Presence of a central bank.
 Sub-markets
 Near money assets
 Availability of ample resources
 Integrated interest rate structure
Functions of money market

 Economic development – Money market

assures supply of funds; financing is done
through discounting of the trade
bills, commercial banks, acceptance
houses and brokers.
 Profitable Investment – the excess reserves
of commercial banks invested in near
money assets.
 Borrowings by the Government – short
term funds at very low interest.
 Importance For Central Bank – If the money
market is well developed, the central bank
implements the monetary policy
successfully.
 Mobilization of Funds – helps in
transferring funds from one sector to
another.
 Savings And Investment – encouraging
savings and investment by promoting
liquidity and safety of financial assets.
 Self-sufficiency Of Commercial Banks –
commercial banks can meet their financial
requirements by recalling some of their
loans.
DIFFERENCE
MONEY MARKET
INSTRUMENTS
Cash
T- bills
mgmt bills

Commerci
G- sec
al papers
 TREASURY BILLS (T-BILLS)

•Issued by the Central Government.

•Treasury bills carry zero risk, i.e. are zero risk instruments.
•Treasury bills are issued by the Central government at a lesser
price than their face value.
•Treasury bills come with different maturity periods like 3-
month, 6-month and 1 year.
•Currently, there are 3 types of treasury bills issued by the
Government of India via auctions, which are 91-days, 182-days
and 364-days treasury bills.
 Cash management bills

•Generic characteristics of T-bills

•Issued for tenure of less than 91 days
•Eligible for SLR
•Called zero coupon securities .
 GOI DATED SECURITIES

•Issued by the Central Government.

•Tenure : 5 yrs to 40 yrs
•Carries fixed rate of interest and floating rate of interest
payable on half yearly basis.
 GOVT. SECURITIES (G-SEC)

•Issued by the Central and state Government

•Auctions is done by ‘e-kuber’ platform.
•Carry zero risk, i.e. are zero risk instruments and called RISK
FREE GILT EDGED SECURITIES.
•Can be sold in secondary markets.
•Easily transferable from one to another person.
 CERTIFICATE OF DEPOSITS

•Participants: Scheduled commercial banks (excluding RRBs),

FIs
•Minimum amount: 1 lac and its multiple
•Tenure: 7 days- 1 yr (for banks) and 1yr – 3 yr (for FIs)
•Rate: fluctuating
•Can be used to determine SLR and CRR.
 COMMERCIAL PAPERS (CPs)

•Participants: Companies, FIs

•Net worth of companies: Greater than 4 cr
•Minimum amount: 5 lacs and its multiple
•Tenure: 7 days- 1 yr
•Rate: fluctuating
•Can be used to determine SLR and CRR.