MONEY MARKET Unit-

3
A P R E S E N TAT I O N O N F I N A N C I A L
MARKETS & INSTITUTIONS

Submitted Branch:- Avni Sharma Shaily Gadre

Group –1
to:- BBA Muskan Sen Sheetal
Members
Prof. Ruchi (3rd Manisha Tripathi
: Meena
Khushwah Year) Shivangi
 POINTS TO BE COVERED IN TODAY’S
PRESENTATION:-

 Meaning of Money Market

 Needs of Money Market
 Roles & Functions of Money Market
 Participants of money Market
 Segments of Money Market
 Call Money Market
 Advantages & Disadvantages
of Call Money market
 Conclusion.
 MEANING OF MONEY MARKET
• Money Market is that part of a financial market
which deals in borrowing and lending of short
term loans generally for a period of less than or
equal to 365 days.
• It is a mechanism to clear short term monetary
transactions in an economy.
 NEEDS FOR MONEY MARKET

• Short Term funds are borrowed and lent.

• No fixed place for conducting with or without the
help of brokers.
• Dealings may be conducting with or without the
help of brokers.
• The short term financial assets that are dealt in
are close substitutes of money.
• Funds are traded for a maximum period of one
year.
• Presence of a large number of sub markets such
as inter-bank call money, bills rediscounting,
treasury bills, etc.
ROLES & FUNCTIONS OF MONEY
MARKET
• Maintain Monetary Equilibrium
1

• Promote Economic Growth

2

• Provide Help to Trade & Industry

3

• Implement Monetary Policy

4

• Help in Capital Formation

5
• Provide Non-Inflationary Source of
6 Finance to Government
PARTICIPANTS OF MONEY MARKET

Central Provident
Government Funds
General
State
Insurance
Government Companies
Public Sector Life Insurance
Undertakings Companies
Scheduled
Commercial Banks Mutual Funds
(SCBs)

Private Sector
NBFCs
Companies
SEGMENTS OF MONEY MARKET

Call Money Commercial

Market Papers
Money Market
Treasury Bills Mutual Funds
(MMMFs)
Commercial Repo & Reverse
Bills Repo Market
Discount &
Certificate of
Finance House of
Deposits (CDs) India(DFHI)
 CALL MONEY MARKET

• Call money market deals with in short term

finance repayable on demand, with a maturity
period varying from one day to 14 days.
• Money lent for one day is called ‘call money’; if
it exceeds 1day but is less than 15 days it is
called ‘notice money’. Money lent for more than
15 days is ‘term money’.
• The borrowing is exclusively limited to banks, who
are temporarily short of funds.
 CALL MONEY MARKET
Banks borrow in this money market for the
following purpose:
• To fill the gaps or temporary mismatches in funds.
• To meet the Cash Reserve Ratio(CRR) &  Statutory
Liquidity Ratio(SLR) mandatory requirements as
stipulated by the RBI.
• To meet sudden demand for funds arising out of
large outflows.
 FEATURES OF CALL MONEY MARKET

• It is short term financial market.

• Maturity period of call loans varies between
one day to fortnight.
• It deals in overnight funds.
• It is a highly liquid asset.
• Call loans are unsecured.
• Interest paid on call loans is known as call
rates.
• Interest Rates are market driven.
• Helps bank to manage short term deficit.
 PARTICIPANTS IN THE CALL MONEY
MARKET
• Scheduled commercial banks (excluding RRBs)
• Non scheduled commercial banks.

• Discount and Finance house of India (DFHI)

• Securities Trading Corporation of India (STCI)

• Co-operatives banks (other than Land

Development Banks)
• NABARD, LIC,UTI,IDBI
LOCATIONS OF CALL MONEY MARKET

Call money markets are located in presidency

towns which are mainly : -
• Mumbai
• Kolkata
• Chennai
• Delhi
• Ahmedabad
 ADVANTAGES
OF CALL MONEY MARKET

High Liquidity

High Profitability

Maintenance of
SLR

Safe and Cheap

Assistance to
Central Bank
Operations
 DISADVANTAGES
OF CALL MONEY MARKET

Uneven
Development

Lack of
Integration

Volatility in
call Money
Rates
 CONCLUSION

• There are 2 types of financial markets- Capital

market & Money Market.
• Money Market is that part of a financial market
which deals in borrowing and lending of short term
loans generally for a period of less than or equal to
365 days.
• It is a mechanism to clear short term monetary
transactions in an economy.
• Market Practices and Regulatory pronouncements
have placed certain restrictions on participation for
each of the sub-markets in the Money Market.
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