The money market also has deals known as ready forward deals which are transactions between market

players in government securities. A ready forward is essentially a short-term (typically 15 days) financing
arrangement by a bank or primary dealer to another such participant. The borrowing bank or primary dealer
availing the financing sells securities to the lending bank and buys them back at the end of the period of the
loan, typically at a slightly higher price to provide for the interest cost on the funds availed. Under prevailing
RBI directions, ready forward transactions (and reverse ready forwards) in money market can be conducted
on dated central government securities, treasury bills and dated state government securities through the SGL /
CGSL account mechanism with settlement through the CCIL. No person is allowed to enter into a transaction
without actually holding the securities in Portfolio.

Though the RBI allowed the market to evolve a benchmark reference rate, over the years the most widely
used benchmark reference rate is the MIBOR disseminated by the NSE since 1998 and has been most
widely accepted benchmark rate. It is also known as the FIMMDA-NSE-MIBOR/MIBID. The MIBOR is an
overnight rate used widely for IRS and FRA transactions.4 The NSE also publishes the 14-day, 1-month and
3-month MIBOR though these are thinly used. In the words of the Late Dr. R.H. Patil5, “despite availability
of MIBID/MIBOR for periods up to 90 days since 1999 the market has not witnessed a term money market
at which funds are actually lent even on a modest scale. The main reason is that market does not consider
these rates as not being dependable for entering into actual transactions but more speculative/indicative in
nature.” Since a term rate market does not exist in India, the traders find it difficult to provide any quotes
for term rates. In recent years, efforts have been made by the CCIL to introduce other reference rates in
the money market such as the CCIL-MIBOR/MIBID and CCBOR/CCBID. The FIMMDA has also been
working on the need for an alternative to the MIBOR. It has been argued by several experts that a CBLO
based term rate for lending and borrowing is to be developed for term products in the money market

Foreign exchange markets comprise of banks and foreign exchange dealers who buy and sell foreign
exchange and their derivatives in various currencies including the home currency. Foreign exchange markets
are also closely linked to economic variables and can be much more volatile than capital markets. An adverse
movement in the economy can affect the foreign exchange markets and vice versa. The South-East Asian crash
in 1997 in the currencies of countries such as Thailand, Malaysia, Indonesia, Hong Kong, Taiwan and Korea
bled their economies to near bankruptcy. The Euro Zone crisis of 2011 was precipitated due to years of low
economic growth in the backdrop of high spending by respective governments which ballooned their fiscal
deficits and had a consequent impact on the stability and future of euro currency. Foreign exchange markets
are closely dependent on balance of payments, net foreign exchange flow from FDI and other economic
factors. The daily currency movements are dictated by market expectations and demand versus supply of
the ` vis-a-vis its basket of currencies. The main players in the foreign exchange market are Indian banks,
foreign banks in India and foreign branches of domestic banks. Foreign exchange market is largely OTC
driven wherein one of the counter parties has to be an authorised dealer under RBI regulations. However,
exchange driven foreign exchange products became quite popular in recent times with their introduction on
NSE and MCX-SX. The global foreign exchange market was estimated to have an average daily trading of
US$ 5.10 trillion as of 2016.
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