Financial sector

  1. Inadequate Stock Exchanges With the phenomenal increase in the number of companies being listed every month and in the number of shareholders, the existing stock exchanges numbering 22 with Mumbai having three, are inadequate. With the phenomenal increase in the number of companies being listed every month and in the number of shareholders, the existing stock exchanges numbering 22 with Mumbai having three, are inadequate. 2. Lacks Transparency Trading transactions in stock exchanges still lack transparency. Buyers and sellers of scrips are at the mercy of brokers and sub-brokers who often quote the lowest traded rate of a script to the sellers and the highest top buyers. Thus , they pocket the maximum fraudulent gain on both the transaction maintain proper accounts, and manipulate them. 3. Stockbroking System Defective The system of stockbroking continues to be defective. The brokers have their sub-brokers and sub-broker, in turn, have their own sub-brokers who manipulate pri...

Capital market is referred to as a place where saving and investments are done between capital suppliers and those who are in need of capital. It is, therefore, a place where various entities trade different financial instruments. It is a market where both equity and debt instrument like equity shares, preference shares, debentures, bonds, etc. are bought and sold. FUNCTIONS 1) It acts in linking investors and savers 2) Facilitates the movement of capital to be used more profitability and productively to boost the national income 3) Boosts economic growth 4) Mobilization of savings to finance long term investment 5) Facilitates trading of securities 6) Minimization of transaction and information cost 7) Encourages a massive range of ownership of productive assets 8) Quick valuations of financial instruments 9) Through derivative trading, it offers insurance against market or price threats 10) Facilitates transaction settlement 11) Improvement in the effectiveness of capital allocation ...

 The Indian money market is not well developed. Compared to the growth in the economy, the growth of the money market has been slow and the influence of the money market in the economy has been quite limited. This can be traced to the following deficiencies in the Indian money market:- (1) DOUBLE CHARACTER:- The Indian economy has dichotomic money markets with an organised sector and unorganised sector. The organised sector consists of specialised banking and financial institutions which operate in the money market in accordance with rules. On the other hand, the unorganised sector do not follow any set rules in loan operations. The two sectors do not have any contact with each other and lack co-ordination for cooperation. In fact the  unorganised sector reduces the effectiveness of monetary policy measures because it does not fall under the jurisdiction of the RBI. (2) CAPTIVE MARKET:- The Indian money market is captive. It is governed by a few institutions which participate ...

 Following  are the functions of money market:-  (1) It provides short term funds to public and private institutions needing such financing for their working capital requirements. It is done by discounting Trade bills through commercial banks, discount houses, brokers and acceptance houses. Thus the money market help the development of commerce , industry and trade within and outside the country. (2) It provides an opportunity to banks and other institutions to use their surplus funds profitably for a short period. These institutions include not only commercial banks and other financial institutions but also large non financial business corporations states, and local  governments. (3) The money market remove the necessity of borrowing of the commercial banks from the RBI. If the former find their reserves short of cash requirements they can call in some of their loans from the money market. The commercial banks prefer to recall their loans rather than borrow from the...

Money market is a centre where short term funds are supplied and demanded. Thus, the main constituents of money market are the lenders who supply and the borrowers who demand short term credit. (I) SUPPLY OF FUNDS:- There are two main sources of supply of short term funds in the Indian money market - an unorganised indigenous sector and organised modern sector. (II) DEMAND FOR FUNDS:- In the Indian money market the main borrowers of short term funds are(a) Central Government (b) State governments (c) local bodies, such as, municipalities, village panchayats,( d)traders ,industrialists, farmers ,exporters and importers , and general public. SUB MARKETS OF ORGANISED MONEY MARKET (1) CALL MONEY MARKET:- The most important component of organised money market is the call money market. It deals in call loans or call money granted for one day. Since the participants in the call money market are mostly banks it is also called interbank call money market. The banks with temporary deficit of fun...

 MEANING The money market is not a market in the usual sense of the term. It does not mean  a single trading place or trading organisation dealing in money. But it is a collective name given to the various firms and institutions that deals with the various grades of money. It is a market in short term funds in which the lenders of the money meet the borrowers of the money. NATURE OF INDIAN MONEY MARKET The structure of money market in India comprises of both organised and unorganised markets. (1) THE ORGANISED MONEY MARKET:- It consists of the RBI, all scheduled commercial banks, cooperative banks and financial institutions like LIC, general insurance corporation and unit trust of India and foreign exchange banks. It is called organised because its path is systematically coordinated by the RBI. Non-bank financial institutions also operate in this market, but only indirectly through banks and not directly. (2) THE UNORGANISED MONEY MARKET:- it includes indigenous bankers, money...