18-06-2012, 04:15 PM
Money Market and Money Market Instruments
Money Market & Money Market Instruments.pptx (Size: 102.69 KB / Downloads: 33)
Money Market
The market where money and highly liquid marketable securities are bought and sold having a maturity period of one or less than one year
The highly liquid marketable securities are also called as ‘ money market instruments’ like treasury bills, commercial paper etc
The major player in the money market
Reserve Bank of India (RBI)
Discount and Finance House of India (DFHI)
Banks
Financial institutions
Government
Big corporate houses
The basic aim of dealing in money market instruments is to fill the gap of short-term liquidity problems or to deploy the short-term surplus to gain income on that.
Definition of Money Market
According to the Reserve Bank of India,
“money market is the centre for dealing, mainly of short term character, in money assets; it meets the short term requirements of borrowings and provides liquidity or cash to the lenders. It is the place where short term surplus investible funds at the disposal of financial and other institutions and individuals are bid by borrowers’ agents comprising institutions and individuals and also the government itself.”
Objectives of Money Market
Providing an equilibrium mechanism for ironing out short-term surplus and deficits
Providing a focal point for central bank intervention for the influencing liquidity in the economy
Providing access to users of short-term money to meet their requirements at a reasonable price
Characteristics of Money Market
Short-term funds are borrowed and lent
No fixed place
Dealings conducted with or without the help the brokers
Financial assets being converted into money with ease, speed, without loss and with minimum transaction cost
Trading period - maximum one year
Presence of a large number of submarkets such as inter-bank call money, bill rediscounting, and treasury bills, etc