GROUP 4

What is Money Market Features of Money Market Objective of Money Market Financial sector reforms Instrument of Money Market Primary Dealers Conclusion

Market for short-term money and financial assets that are near substitutes for money.

Short-Term means generally period upto one year and near substitutes to money is used to denote any financial asset which can be quickly converted into money with minimum transaction cost.
It is a place for Large Institutions and government to manage their short-term cash needs

It doesnt actually deal in cash or money but deals with substitute of cash like trade bills, promissory notes & govt papers which can converted into cash without any loss at low transaction cost. It includes financial intermediaries. institutions and

FINANCIAL MARKETS

MONEY MARKET

CAPITAL MARKET

1. 2. 3.

It is not a single market but a collection of markets for several instruments. It is wholesale market of short term debt instruments. Its principal feature is honor where the creditworthiness of the participants is important. more

To help in implementing Monetary Policy. To maintain monetary equilibrium. To promote economic growth. To help in Capital Formation.

Money market provides non-inflationary sources of finance to government

To provide room for overcoming short term deficits. To enable the central bank to influence and regulate liquidity in the economy through its intervention in this market. To provide a reasonable access to users of short-term funds to meet their requirement quickly, adequately at reasonable cost.

Call or Notice Money Term Money Treasury Bills Commercial Paper Certificate of Deposit Bankers Acceptance Bills for Discounting and Re-Discounting IBPC CBLO Repo Instruments

I :- ORGANISED STRUCTURE 1. Reserve bank of India. 2. DFHI (discount and finance house of India). 3. Commercial banks i. Public sector banks SBI with 7 subsidiaries Cooperative banks 20 nationalised banks ii. Private banks Indian Banks Foreign banks 4. Development bank IDBI, IFCI, ICICI, NABARD, LIC, GIC, UTI etc.

II. UNORGANISED SECTOR 1. Indigenous banks 2 Money lenders 3. Chits 4. Nidhis III. CO-OPERATIVE SECTOR 1. State cooperative i. central cooperative banks Primary Agri credit societies Primary urban banks 2. State Land development banks central land development banks Primary land development banks

A bankers acceptance (BA) is a short-term credit investment created by a non-financial firm. BAs are guaranteed by a bank to make payment. Acceptances are traded at discounts from face value in the secondary market. BA acts as a negotiable time draft for financing imports, exports or other transactions in goods. This is especially useful when the credit worthiness of a foreign trade partner is unknown.

The call/notice money market forms an important segment of the Indian money market. Under call money market, funds are transacted on overnight basis and under notice money market, funds are transacted for the period between 2 days and 14 days

Repo is a form of overnight borrowing and is used by those who deal in government securities. They are usually very short term repurchases agreement, from overnight to 30 days of more. The short term maturity and government backing usually mean that Repos provide lenders with extreamly low risk. Repos are safe collateral for loans.

CP is a short term unsecured loan issued by a corporation typically financing day to day operation.
CP is very safe investment because the financial situation of a company can easily be predicted over a few months. Only company with high credit rating issues CPs.

A CD is a time deposit with a bank. Like most time deposit, funds can not withdrawn before maturity without paying a penalty. CDs have specific maturity date, interest rate and it can be issued in any denomination. The main advantage of CD is their safety. Anyone can earn more than a saving account interest.

(T-bills) are the most marketable money market security. They are issued with 91, 182 and 364 days maturity. T-bills are purchased for a price that is less than their par(face) value; when they mature, the government pays the holder the full par value. T-Bills are so popular among money market instruments because of affordability to the individual investors.

Investors Treasury bills can be purchased by any one (including individuals) except State govt. These are issued by RBI and sold through fortnightly or monthly auctions at varying discount rate depending upon the bids. Denomination Minimum amount of face value Rs.25,000 and in multiples there of. There is no specific amount/limit on the extent to which these can be issued or purchased.

Lack of Integration Lack of Rational Interest Rates structure

Absence of an organized bill market

Segment Issuer
Govern ment Central Government

Instruments
Zero Coupon Bonds, Coupon Bearing Bonds, Capital Index Bonds, Treasury Bills.

Public Sector

Government Agencies / Statutory Bodies Public Sector Units

Govt. Guaranteed Bonds, Debentures

PSU Bonds, Debenture, Commercial Paper Debentures, Bonds, Commercial Paper, Floating Rate Bonds, Zero Coupon Bonds, InterCorporate Deposits Certificate of Deposits, Bonds Certificate of Deposits, Bonds

Private

Corporate Banks Financial Institutions