MONEY MARKET

KANUPRIYA
ASSISTANT PROFESSOR
COMMERCE DEPARTMENT
GCG-11,CHANDIGARH
 CONTENTS
• INTRODUCTION
• CHARACTERISTICS OF MONEY MARKET
• SIGNIFICANCE OF MONEY MARKET
• STRUCTURE OF MONEY MARKET
• DEFECTS OF INDIAN MONEY MARKET
• SUGGESTIONS FOR IMPROVEMENTS
• SUMMARY
INTRODUCTION

FINANCIAL MARKETS

CAPITAL MONEY
MARKET MARKET
 Continued….
• The money market is a mechanism that
deals with the lending and borrowing of
short term funds (less than one year).
• A segment of the financial market in
which financial instruments with high
liquidity and very short maturities are
traded.
 Continued…….
• It doesn’t actually deal in cash or money
but deals with substitutes of cash like
trade bills, promissory notes & govt
papers which can be converted into cash
without any loss at low transaction cost.

• It includes all individual, institution and

intermediaries.
 CHARACTERISTICS
• It is a market dealing with short term funds
or financial assets.
• These financial assets have a maturity period
of upto one year.
• Financial assets can be easily converted into
cash.
• It consists of various sub markets like call
money market, bill market etc.
• Central bank, commercial bank, financial
institutions are main constituents of money
market.
 SIGNIFICANCE
• ECONOMIC DEVELOPMENT
• PROFITABLE INVESTMENT
• BORROWING BY GOVERNMENT
• IMPORTANCE TO CENTRAL BANK
• MOBILISATION OF FUNDS
• HELPFUL IN SELF SUFFICIENCY OF
COMMERCIAL BANKS
• SAVING AND INVESTMENT
 STRUCTURE OF MONEY
MARKET

MONEY MARKET

COMPONENTS INSTITUTIONS INSTRUMENTS

 COMPONENTS

MONEY MARKET

CALL COLLATERAL ACCEPTANCE

BILL MARKET
MONEY MARKET LOAN MARKET MARKET
 CALL MONEY MARKET
• MARKET FOR VERY SHORT PERIOD
• MAINLY DEALS WITH ONE DAY LOANS
• LOAN PERIOD DOES NOT EXCEED SEVEN
DAYS
• LOANS ARE GENERALLY MADE WITHOUT
ANY COLLATERAL SECURITY
• LOW RATE OF INTEREST
• HIGH LIQUIDITY
COLLATERAL LOAN MARKET
• LOANS ARE GIVEN FOR FEW
MONTHS.
• LOANS ARE BACKED BY SECURITIES.
• COLLATERAL MONEY IS RETURNED
WHEN LOAN IS REPAID.
• LOANS ARE GENERALLY ADVANCED
BY COMMERCIAL BANKS TO PRIVATE
PARTIES IN THE MARKET.
 ACCEPTANCE MARKET
• MARKET FOR BANKER’S
ACCEPTANCES
• OLD FORM OF COMMERCIAL CREDIT
• DRAFTS DRAWN UPON A BANK ARE
ACCEPTED AND ARE PAYABLE ON A
SPECIFIED FUTURE DATE
 BILL MARKET
• MARKET WHERE BILLS ARE BOUGHT
AND SOLD
• DEALS IN SHORT TERM PAPERS LIKE
BILLS OF EXCHANGE AND TREASURY
BILLS
• BILLS OF EXCHANGE ARE
COMMERCIAL PAPERS
• TREASURY BILLS ARE GOVERNMENT
PAPER SECURITIES
 INSTITUTIONS
• CENTRAL BANK • ACCEPTANCE
HOUSE
• COMMERCIAL
BANKS • BILL BROKERS

• INSURANCE • BUSINESS
COMPANIES CORPORATIONS
 MONEY MARKET
INSTRUMENTS
COMMERCIAL
BILLS

TREASURY COMMERCIAL
BILLS PAPERS

INSTRUMENTS

CERTIFICATE
REPURCHASE
OF
AGREEMENTS
DEPOSITS

CALL AND
SHORT NOTICE
MONEY
DEFECTS OF INDIAN MONEY
MARKET
EXISTENCE OF UNORGANISED SECTOR
D
E LACK OF COORDINATION
F
E LACK OF DEVELOPED BILL MARKET
C
T SHORTAGE OF FUNDS
S
LACK OF UNIFORMITY IN
O INTEREST RATES
F
LACK OF WELL ORGANISED
I BANKING SYSTEM
M
M UNDERDEVELOPED BANKING HABITS
 SUGGESTIONS FOR
IMPROVEMENTS
CONTROL OVER DEVELOPMENT ADVANCED
INDIGENOUS OF BILL INFORMATION
BANKING MARKET TECHNOLOGY

MORE
REORGANISED QUICKER MARKET
CLEARING REMITTANCE PARTICIPANTS
HOUSES FACILITY

ESTABLISHMENT REMOVAL OF
REDUCTION OF OF ACCEPTANCE VARIATIONS IN
DISCOUNT RATES HOUSE INTEREST RATES
 SUMMARY
• The money market specializes in debt
securities that mature in less than one year.
• Money market securities are very liquid, and
are considered very safe.
• With the globalisation of Indian economy,
the Indian money market has to be geared up
to become a significant instrument for
growth .
• Central bank and government have to take
further steps to improve the working of
money market.
THANK YOU