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    Indian Money Market

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    Ishmeet Kaur
    The document discusses the Indian money market, including what it is, its key features and objectives. It defines the money market as a market for short-term financial assets that can easily be converted into cash. It deals in assets with maturities of less than one year, and includes various financial institutions. The objectives are to provide short-term funding, allow the central bank to regulate liquidity, and provide reasonable access to short-term funds. The Reserve Bank of India plays an important role in influencing liquidity and interest rates through tools like cash reserve requirements and open market operations.

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    Indian Money Market

    Uploaded by

    Ishmeet Kaur
    75 views17 pages
    The document discusses the Indian money market, including what it is, its key features and objectives. It defines the money market as a market for short-term financial assets that can easily be converted into cash. It deals in assets with maturities of less than one year, and includes various financial institutions. The objectives are to provide short-term funding, allow the central bank to regulate liquidity, and provide reasonable access to short-term funds. The Reserve Bank of India plays an important role in influencing liquidity and interest rates through tools like cash reserve requirements and open market operations.

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    25066343 Indian Money Market

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    The document discusses the Indian money market, including what it is, its key features and objectives. It defines the money market as a market for short-term financial assets that can easily be converted into cash. It deals in assets with maturities of less than one year, and includes various financial institutions. The objectives are to provide short-term funding, allow the central bank to regulate liquidity, and provide reasonable access to short-term funds. The Reserve Bank of India plays an important role in influencing liquidity and interest rates through tools like cash reserve requirements and open market operations.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    75 views17 pages

    Indian Money Market

    Uploaded by

    Ishmeet Kaur
    The document discusses the Indian money market, including what it is, its key features and objectives. It defines the money market as a market for short-term financial assets that can easily be converted into cash. It deals in assets with maturities of less than one year, and includes various financial institutions. The objectives are to provide short-term funding, allow the central bank to regulate liquidity, and provide reasonable access to short-term funds. The Reserve Bank of India plays an important role in influencing liquidity and interest rates through tools like cash reserve requirements and open market operations.

    Copyright:

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    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 17

    INDIAN MONEY

    MARKET
    CONTENTS
    WHAT IS MONEY MARKET?
    As per RBI defines Money Market as “A market for
    short terms financial assets that are close
    substitute for money, facilitates the exchange of
    money in primary and secondary market”.

     The money market is a mechanism that deals with


    the lending and borrowing of short term funds
    (less than one year).

     A segment of the financial market in which


    financial instruments with high liquidity and very
    short maturities are traded.
    Continued…….
     It doesn’t 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 institutions and


    intermediaries (RBI, Banks, PDs, MFs, Insurance
    cos., State govt., provident funds, NRIs, large
    corporate investors.).
    FEATURES OF MONEY
    MARKET?
     It is a market purely for short-terms funds or
    financial assets called near money.

     It deals with financial assets having a maturity


    period less than one year only.

     In Money Market transaction can not take place


    formal like stock exchange, only through oral
    communication, relevant document and written
    communication transaction can be done.
    Continued……..
     Transaction have to be conducted without the
    help of brokers.

     It is not a single homogeneous market, it


    comprises of several submarket like call money
    market, acceptance & bill market.

     The component of Money Market are the


    commercial banks, acceptance houses & NBFC
    (Non-banking financial companies).
    OBJECTIVE OF MONEY
    MARKET?
     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.
    FINANCIAL SECTOR
    REFORMS

    o Object of financial sector reforms by


    Government of India & RBI.
    o Condition of money market before Pre
    reform period (Before 1991)
    o Sukkmoy Chakravarthi Committee( 1985)
    o Vaghul Committee( 1985-91)
    The Role of the Reserve Bank
    of India in the Money Market:
    The Reserve Bank of India is the most important constituent of the
    money market. The market comes within the direct preview of the
    Reserve Bank of India regulations.The aims of the Reserve Bank’s
    operations in the money market are:
     To ensure that liquidity and short term interest rates are maintained at
    levels consistent with the monetary policy objectives of maintaining
    price stability.
     To ensure an adequate flow of credit to the productive sector of the
    economy and
     To bring about order in the foreign exchange market.
     The Reserve Bank of India influence liquidity and interest rates through
    a number of operating instruments - cash reserve requirement (CRR)
    of banks, conduct of open market operations (OMOs), repos, change in
    bank rates and at times, foreign exchange swap operations.
    Factors affecting Money
    Markets
    Interest Rate/ Yield- Market expectations
    & risk premium
    Mss/ Liquidity - RBI Monetary Policy
    Inflation- Fiscal Deficit/ Govt. borrowing
    Cyclical trends in the Economy
    Forex reserves/ Exchange Rate
    MONEY MARKET
    INSTRUMENTS [Sec. 45U(b)]
     Treasury bills
     Certificate of deposit.
     Commercial papers.
     Money at call and short notice in the call loan
    market.
     Inter-bank term money
     Repo instrument
     Banker's Acceptance
    Treasury Bills (T-Bills)

     (T-bills) are the most marketable money market


    security.
     They are issued with three-month, six-month
    and one-year maturities.
     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.
    Continued…..
     They are highly liquid as they are of shorter
    tenure and there is a possibility of an
    interbank repos on them.
     They have an assured yield, low transaction
    cost, and are eligible for inclusion in the
    securities for SLR purpose
     Recently T-Bills are also being issued
    frequently under the Market Stabilization
    Scheme (MSS).
    Advantages of investing in T-
    Bills:
     No Tax Deducted at Source (TDS)
     Zero default risk as these are the liabilities
    of GOI
     Liquid money Market Instrument
     Active secondary market thereby enabling
    holder to meet immediate fund
    requirement.
     
    Amount & Auction
     Treasury bills are available for a minimum amount of
    Rs.25,000 and in multiples of Rs. 25,000. Treasury bills
    are issued at a discount and are redeemed at par.
    Treasury bills are also issued under the Market
    Stabilization Scheme (MSS). They are available in both
    Primary and Secondary market. 
     The 91-day T-bills are auctioned every week on
    Wednesdays, 182 days and 364-day T-bills are auctioned
    every alternate week on Wednesdays. The Reserve Bank
    of India issues a quarterly calendar of T-bill auctions
    Conclusion

     Lastly concluded that the Indian money market plays a


    vital role in the Indian financial system. It is a short term
    market where the liquidity is very high. The government
    securities are traded in a short term period. It mobilizing
    the financial assets in the various sectors and traded by
    the banks and other financial intermediaries. This market
    regulates by the primary dealers where the STCI &
    SBIDFHI plays a pivotal role. These institution regulates
    the market. So this market is very much needed for the
    financial institutions to meet the need of short term debt
    in the market.
    Thank you

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