Money market

 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 lenders, both professional and non professional traders, merchants, landlords, pawnbrokers, nidhis and chit funds. it is called an organised because its path is not coordinated by the RBI.

FEATURES OF MONEY MARKET

(1) Constituents of money market:- Like other markets, money market also has three constituents :- (a)It has buyers and sellers in the form of borrowers and lenders (b) It has a commodity i.e short term maturity credit instruments (c) It has a price in the form of rate of interest which is an item of cost to the borrower and return to the lender.

(2) Heterogeneous market:- The money market is not a single homogeneous market but consists of several submarkets, each market dealing with a specific short term credit instrument ,example ,call money market ,trade bill market,.etc. It is difficult to talk about a general money market.

(3) Dealers of money market:- The financial institutions in the money market meet the short-term needs of the borrower's. The borrower's in the money market are  traders, manufacturers, speculators , and even government institutions. The lenders in the money market are commercial banks, Central banks, non-bank financial intermediaries, etc.

(4) Short term loans :- Money market deals with short term loans. In a money market, the borrowers can obtain funds for periods varying from a day, a week, a month or three to six months.

(5) Physical contact not necessary:-  Money market does not refer to a specific place where borrowers and lenders meet each other. In fact, it is not necessary that the borrowers and lenders should have personal contact with each other at a particular place. They may carry on their negotiations through telephone or mail. Thus, money market simply relates to the arrangement which establishes direct and indirect contact between the borrowers and the Lenders.


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