Money Market

Introduction
• Assets that are close substitute for money.
• Short term fund having a maturing period of one or less than one
year.
• It does not occurred at physical location (like the stock market), an
activity that conducted over the telephone.
Characteristics of Money Market
• Not a single market but a collection of markets for several
instruments
• Wholesale market of short-term debt instruments
PLAYERS or PARTICIPANTS OF MONEY MARKET:-

•Government, RBI, DFHI (Discount and finance House of India)

Banks, CCIL, Mutual Funds, Corporate Investors, Provident
Funds, PSUs (Public Sector Undertakings), NBFCs (Non-
Banking Finance Companies), insurance companies, primary
dealers, the Securities Trading Corporation of India (STCI) etc.
Efficient Money Market
• It provide stable source funds to banks in addition to deposits,
allowing alternative financing structure and competition.
• Developed inter-bank market provides the basis for growth and
liquidity in money market including the secondary market for
commercial paper and treasury bills.
• Liquid money market provides an effective source of finance to long-
term finance to borrowers. Short term money market is necessary for
development of long-term capital market.
• Monetary control through indirect method (repos and open market
operations) is more effective if money market is liquid.
Indian Money Market
• Average turnover of Money market in India 1,121.75 billion daily (13
August 2015). This implies 2-4 percent of annual GDP of India gets
traded in money market.
• Money market is many times larger than capital market.
Reforms in Indian Money Market
• Indian Government appointed a committee under the chairmanship of
Sukhamoy Chakravarty in 1984 to review the Indian monetary system.
Later, Narayanan Vaghul working group and Narasimham Committee was
also set up. As per the recommendations of these study groups and with
the financial sector reforms initiated in the early 1990s, the government has
adopted following major reforms in the Indian money market.
 established the Money Market Mutual Funds (MMMFs) in April 1992.
The Discount and Finance House of India (DFHI) was set up in April 1988
The Clearing Corporation of India limited (CCIL) was set up in April 2001.
Reserve Bank of India in its Mid Term Review of Monetary and Credit Policy
for the year 2002 – 2003 has mentioned about the introduction of CBLO as
a money market instrument
MSF in 2013