ECONOMIC ANALYSIS

MONEY MARKET

BY SHEKINAH ROY ROHANN PRADHAN MUNTAZIR ABBAS SHAHJAHAN MALIK PARAG BANDHATE SHIVANI NANDWANA

INTRODUCTION
The Money Market is a market for lending and borrowing of short term funds. It deals in funds and financial instruments having a maturity period of one day to one year. It covers money and financial assets that are close substitutes of money. The instruments in the money market are of short term nature and highly liquid.

It is not a single market but a collection of different markets. It is a wholesale market for short term debt instruments. DEFINITION : Money Market refers to a mechanism whereby on the one hand borrowers manage to obtain short term loanable funds and on the other, lenders succeed in getting creditworthy borrowers for their

FEATURES AND DEFECTS

DICHOTOMY LACK OF INTEGRATION MULTIPLICITY/DIVERSITY/CHANGE IN INTEREST RATES

ABSENCE OF ORGANISED BILL MARKET

SHORTAGE OF FUNDS IN THE MONEY MARKET SEASONAL STRINGENCY OF FUNDS INADEQUATE BANKING FACILITIES INADEQUATE CREDIT INSTRUMENTS

STRUCTURE

ORGANISED SECTOR
CALL MONEY MARKET

TREASURY BILLS MARKET

COMMERCIAL BILLS MARKET

CERTIFICATE OF DEPOSIT MARKET

COMMERCIAL PAPER MARKET

MONEY MARKET MUTUAL FUNDS

REPO MARKET

DISCOUNT AND FINANCE HOUSE OF INDIA

UNORGANISED SECTOR
Indigenous Bankers Money Lenders Chit Funds

Financial Brokers Finance Companies

FUNCTIONS OF MONEY MARKET

It provides a mechanism to achieve equilibrium between demand for and supply of short term funds. It helps the RBI in the effective implementation of monetary policy. It provides ample avenues for investment of short term funds with fair returns. It provides funds to users to meet their short term needs at fair prices.

It helps in allocation of short term funds through inter bank transactions and money market instruments.

It also provides funds in non inflationary way to the government to meet its deficits.

PLAYERS AND THEIR ROLES

RBI

Banks

Financial Institutions

Government

Corporates

Institutional Players

CONCLUSION
The detailed analysis of the Indian Money Market suggests that the Money Market in India does not satisfy the criteria of a developed money market but shows symptoms of an under developed money market. Moreover in terms of organisation, resources,elasticity and stability it is not comparable to foreign money markets.

It lacks number of sub-markets and does not attract foreign funds. But the deficiencies of the Indian Money Market are slowly but steadily overcome by the policy measures undertaken by the RBI from time to time.