Money Market : Details about Money Mar
DIFFERENCE BETWEEN MONEY MARKET AND CAPITAL MARKET
- CAPITAL MARKET
- Long term funds
2. Shares, debentures, bonds etc., Are main instruments in capital market
3. Small face value of securities
4. Development banks, investment
institutions are major players
5. Formal place, stock exchanges
6. Brokers playing a vital role
- MONEY MARKET
- Short term funds
2. Instruments are: bills, CPs,
T-bills, CDs etc.,
3. Huge face value for single
instrument
4. Central and coml. banks are major
players
5. No formal place for transactions
6. Usually no role for brokers
- Money Market
A market where short term funds are borrowed and lend is called money market. It deals in short term monetary assets with a maturity period of one year or less. Liquid funds as well as highly liquid securities are traded in the money market. Examples of money market are Treasury bill market, call money market, commercial bill market etc.
- Money Market Instruments
Financial instruments that are used for raising and supplying money in a short period not exceeding one year through money market are called money market instruments.
It includes treasury bills, commercial paper, call money, short notice money, certificates of deposits, commercial bills, money market mutual funds.
- MONEY MARKET PLAYERS
GOVERNMENT - Is an active player in the Money Market in India Economy and Most of the Economies, Govt. is the Biggest Borrower of this Market.
RBI- Govt. securities and Treasury Bills are Securities issued by RBI on Behalf of the Govt. of India to meet the latter’s Borrowing for Financing Fiscal Deficit. Apart Functioning as a merchant Banker to the govt. RBI regulates the Money Market and issues Guidelines to govern the money market.
BANKING INDUSTRIES- another Big and Effective Player of Money market is the Banking Industry. Banks Mobilize Deposits and utilize the same for credit Accommodation.
FINANCIAL INSTITUTIONS- Financial institutions also undertake Lending and Borrowing of short-term Funds.
- OTHER INSTITUTIONAL PLAYERS- Mutual Funds, Foreign Institutional Investors and Corporates.
- WORKING OF MONEY MARKET
The Volumes are Very High and large. Generally Transaction are settled on a daily basis. Trading in the Money market is conducted over the Telephone, Followed by written Confirmation From both the Borrowers and Lenders.
- MAIN INSTRUMENTS OF MONEY MARKET IN INDIA
- Treasury Bills
2. Commercial Paper
3. Call Money
4. Certificate of Deposit
5. Commercial Bills
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