Banking Awareness 40: Indian Money Market - Structure and features.

Are you willing to know the detailed information about the Indian Money Market - Structure and features? Here is the article which gives you clean and clear information about the Indian Money Market - Structure and features. It is one of the Monetary systems which involves in the leading and borrowing of short term funds. This Indian Money Market has been observed as that the financial institutions do employ money market instruments for financing short-term monetary requirements for various sectors such as Financial, Manufacturing, and Agriculture.

Structure of Money Market in India:-

In our Country, the Money Markets are regulated by both RBI and SEBI. It is divided into organized and unorganized segments. The unorganized market is old Indigenous market mainly made of indigenous bankers, money lenders, etc.

The structure of the Indian Money Market is discussed below:-

  1. Call Money/ Notice Money/ Term Money Market.
  2. Treasury Bill.
  3. Commercial Bills
  4. Certificate of Deposits.
  5. Commercial papers. 
  6. Money Market Mutual Funds.
  7. Repo/ Reverse Repo Market.
  8. Discount and Finance House of India.

Important Features of Indian Money Market:-

It was highly impacted by the RBI for the functioning of the Indian Money Market, and it has much efficiency for the Money Market.

  • It helps in tackling the temporary liquidity crisis in the country.
  • if the money market does not sync with the RBI, then the Central bank may not achieve its desired goals.
  • The Government deficits are financed through the Money Market.
  1. Components of the Money Market.
  2. Indigenous Markets.
  3. Rates of Interest.
  4. Volatile Call money Market.
  5. Organized and Unorganized sectors.
  6. Busy and Slack Seasons.
  7. The dominance of Government Securities.
  8. Underdeveloped Bill Market.
  9. Foreign Money Markets.

Components of the Money Market.:-

The Indian market is characterized by the presence of various types of financial institutions such as Non-Banking Financial Intermediaries, Cooperative Banks, Export-Import banks, indigenous lenders and so on. They cater to the financial needs of different sectors.

Indigenous Markets:-

Money Market is all about indigenous components like indigenous lenders and so on. Many Non-Banking Financial Companies (NBFCs) have come up, which raise funds from the general public. NBFCs are outside the control and supervision of the RBI.

Rates of Interest:-

Indian Money Market is characterized by diversity in interest rates. Prime examples are the Government borrowing rates, deposit and lending rates of commercial banks, deposit and lending rates of co-operative banks and so on. This diversity is because of the immobility of funds from one section of the money market to another.

Volatile Call money Market:-

Indian Call Money Market rate is highly volatile. In peak season it may shoot up to 7-8%. However, in the slack season, it falls to as low as 0.5%. RBI tries to moderate this volatility in the Call Money Market by supplying additional funds when supply is short and when call rates are high. Also, it absorbs the additional funds when the Call Money Market has surplus funds. 

Organized and Unorganized sectors:-

The Indian Money Market has two sectors, Organized Sector, and Unorganized Sector. The cooperation and contact between the sectors are not too great. Also, the rate of interest in both the markets fluctuates widely.

Busy and Slack Seasons:-

Owing to fluctuating demand for funds, there are two seasons in Indian money Market, namely, the busy season and the slack season. November to April is the busy season as agricultural products come into the market during this time. Therefore, the demand for funds during this period is high. May to October is the slack season. During this time, funds are repaid and demand for funds falls.

The dominance of Government Securities:-

Indian Money Market is dominated by government Securities and Semi-Government Securities.

Underdeveloped Bill Market:-

Indian Money Market has an underdeveloped Bill Market. Due to this, it has almost no Acceptance and Discount Houses.

Foreign Money Markets:-

There is no such movement of funds between the Indian Money Market and Foreign Money Markets.

 

 

 

 

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