MONEY MARKET IN INDIA

What is Money Market?

money market is the market in which commercial banks, financial institutions , corporate and government borrow the money for short term period i.e. less than one year.

so money market involves lending and borrowing funds for short term periods.
money market is the investment for commercial banks who have excess funds for short term periods.

to reduce the short term deficit government issued the g-sec i.e. government security or treasury bill.

instrument used in money market -

varous instrument used in money market:

1. call money: Call money is also refereed as inter bank.

A short-term money market, which allows for large financial institutions, such as banks, mutual funds and corporations to borrow and lend money at inter bank rates. The loans in the call money market are very short, usually lasting no longer than a week and are often used to help banks meet reserve requirements.

While known as an inter bank market, many of the players are not banks. Mutual funds, large corporations and insurance companies are able to participate in this market. Many countries, such as India, are beginning to push for a purification of the call money market, but adding regulations that allow only banks to participate.



2. treasury bill: whenever government need fund for short term duration issued the government security to the public.
types of treasury bill:
1. 91 days
2. 182 days


3. commercial paper: it issued at discount price and redeemed at face value. for e.g. you will get 1000 commercial paper at rupees 900 and redeemed at 1000 at maturity period. but any body can not issued commercial paper.
SEBI has prescribed some guideline.
company:
1. minimum tangible net worth should be at least 4 crore
2. company should be listed in any stock exchange.
3. a good credit rating agency by crisil(credit rating information services of India ) or any such other good credit rating agency.
4. maximum limits is 100% of its working capital.

company which satisfy the above condition can issued the commercial paper in money market.


4. certificate of deposit: started in 1989 by reserve bank of India.
issued at discount price and redeemed at face value.normally financial institution like icici, idbi and ifci issued the certificate of deposit subject to RBI's approval.

5. bill of exchange: it can be domestic bill of exchange or international bill of exchange.



Brijesh Mishra
brijeshmishra49@gmail.com