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MONEY MARKET IN INDIA

Introduction

The monetary policy in India is a case of monetary management in a developing economy with an
unorganized money market. The study is, therefore, valuable for the undeveloped and under
developed countries as well as for developed countries. Since the monetary policy in India
operates in the organized and unorganized sectors of money market, the structural changes have
to be analyzed first.

The modern sector of Indian money market is well organized and integrated. The organized
sector of the Indian money market is far more organized and developed than the money market in
most of the countries of the world. The organized sector comprises of the Reserve Bank of India,
Commercial Bank, Foreign Banks, Cooperative Banks, Financial Corporation, and the Discount
and Finance House of India. The money market in Mumbai operates just like London money
market or New York money market.

A money market is a mechanism through which short term funds are loaned and borrowed and
through which a large part of the financial transactions of a particular country or of the world are
cleared. The money market is better known as a place for large institutions and government to
manage their short-term cash needs. However, individual investors have access to the market
through a variety of different securities. Money market is the center for dealings mainly of short
term character, in money assets, it meets short term requirement of borrower and provide liquidity
or cash to the lenders.

Money market refers to the activity rather than a place. This activity covers lending and borrowing
activities of short-term funds. The market deals in call and notice deposit, short-term bills,
promissory notes and government papers etc… which are drawn for short periods. These days
money market instruments are many, such as treasury bills, commercial papers, certificate of
deposits, commercial bills, etc… However these securities and instruments should have maturity
period of less than one year.

The money market is a subsection of the fixed income market. We generally think of the term
fixed income as synonymous with bonds. In reality, a bond is just one type of fixed income
security. The difference between the money market and the bond market is that the money
market specializes in very short term debt securities (debt that matures in less than one year).
Money market investments are also called cash investments because of their short maturities.
Money market securities are issued by governments, financial institutions and large corporations.

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These instruments are very liquid and considered extraordinarily safe. Because they are
extremely conservative, money market securities offer significantly lower return than most other
securities.

The evolution of money market in India

The Vaghul Committee (1987), a working group on money market appointed by RBI under the
chairmanship of Narayanan Vaghul had suggested measures to develop the money market in
India. The following are some initiative taken up by the RBI as to follow up of those
recommendations.
DFHI (Discount and Finance House in India) was formed in March 1988 to enable liquidity of the
money market instruments.
Widening the range of money market instrument, introduction of the new instrument like CP, CD
and Interbank Participation Certificates during 1988-89. Interest rate regulations in call money
markets were gradually removed to make it a market determined one.

The bank rate has become the reference rate in the money market and the minimum limit is set
usually by the call rates and the repo rates and the bank rate acts as a ceiling. The other
benchmark instruments are Government Securities and the Treasury Bills.

The characteristic features of a money market:

In order to fulfill the above objective, the money market should be fully developed and efficient. In
every country of the world, some type of money market exists. Some of them are highly
developed while other are not well developed.
Certain essential features of a developed money market are as follows:

Highly organized banking system

The commercial bank is the nerve centre of the whole money market. They are the principal
suppliers of short term funds. Their policies regarding loans and advances have impact on the
entire money market. The commercial banks serve as vital link between the central bank and the
various segment of the money market. Consequently a well developed money market and highly
organized banking system co-exist. In an underdeveloped money market, the commercial
banking system is not fully developed.

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Dualistic character

The money market has two components, organized and unorganized money market. Organized
money market consists of the apex institution i.e. The Central Bank, the Commercial Banks, Co-
operative banks etc… The unorganized money market has the Indigenous Bankers, Agency
Houses, Money Lenders etc...

Presence of a Central Bank

The central bank acts as the banker’s bank. It keeps their cash reserve and provides them
financial accommodation in difficulties by discounting their eligible securities. In other words, it
enables the commercial banks and other institution to convert their assets into cash in times of
financial crisis. Through its open market operations, the central bank absorbs surplus cash during
off-season and provides additional liquidity in the busy seasons. Thus the central bank is the
leader, guide and controller of the money market. In an underdeveloped money market, the
central bank is in its infancy and not in a position to influence and control the money market.

Existence of Sub-markets

The number of sub markets determines the development of a money market. The larger the
number of sub market, the broader and more developed will be the structure of money market.
The several sub-markets together make a coherent money market. In an underdeveloped money
market, the various sub markets, particularly the bill market, are absent. Even if sub markets
exist, there is no co-ordination between them. Consequently, different money rates prevail in the
sub markets and they remain unconnected with one another.

Ample Resources

There must be availability of sufficient funds to finance transactions in the sub markets. These
funds may come from within the country and also from foreign countries. The London, New York
and Paris money markets attract funds from all over the world. The underdeveloped money
markets are starved of funds.

Demand and Supply of Funds

There should be a large domestic and foreign trade. Besides it should have adequate amount of
liquidity in the form of large amounts maturing within a short period.

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In the global scenario, few money markets have been operating since a long time, while the other
is of recent origin. The money market evolved during the 19 th century in London. In the US
regulation prohibited interstate and intrastate branching of banks. This led to a fragmented
banking system which had no proper funds transmission process. To satisfy the credit
requirement, the money market was developed initially in the call money market and commercial
paper market. Later due to changing regulations, call loans were not much active. However the
CP market was quite active. London also had a thriving bill market. Discount houses have a
played a major role in developing the sterling money market.

The growth of these two money market i.e. the US and the UK was restricted for sometime due to
the depression of the 1930s and the deregulation in the banking system. However, today these
two markets being the oldest have become global markets offering a variety of instruments.

Most of the other money markets have been developed based on UK and US lines. In the Paris
money market, discount houses played an active role in developing the bill market. Money market
mutual fund (Mammas) has gained greater momentum. The Japanese money market also has
developed its bill market on the lines of the London market. Interbank loans play a key role in this
market. Due to an increase in the pressure for developing the Euro yen market, the Japanese
had deregulated their money market

Integration in the money market

Presenting itself as the market for short term fund, money market should essentially incorporate
feature of adequate liquidity and minimum price fluctuation. These can, however, be attained
when the market is wide enough and there are a large number of transactions taking place to
ensure adequate liquidity and price stability. In addition to the volume of the transactions, the
pace with which they are entered into also is of utmost importance especially to attain greater
depth in the market. Sub markets within the money market are well integrated to ensure free flow
of funds. Such integration also extends to the various instruments within the sub markets.
Specialization has essentially become a feature of the money market operators and instrument.
Thus, it can be observed that integration and specialization should necessarily be the feature of a
developed money market to provide adequate depth for its operations. As mentioned above,
integration results in a free and quick flow of funds between markets / sub markets / segments
within the submarkets. This flow of funds is, however, possible when there is no gap between the
various markets. To eliminate / reduce the gaps present between the various segments,
specialized agencies / operators are being introduced into the money market. These operators,
who are generally registered dealers with the central bank, maintain continuous contacts with

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other markets players and ensure a spillover of funds from one submarket to another due to their
access to various markets. Further, by bridging the gaps and increasing the volumes of
transactions a single price (not considering the variances due to brokerage charge, taxes etc) can
be set for each asset category. Thus integration coupled with specialization will enhance the
volumes of transaction taking place in the money market and ensure greater depth for the same.

Organized and Unorganized Market

Organized sector

The organized sector of the money market consists of the central bank, commercial banks, large
sized joint stock companies lending money, financial intermediaries such as the life insurance,
credit and investment corporations, co-operative banks, insurance companies etc… and call loan
brokers, general finance brokers and stock brokers. The unorganized sector of the money market
is largely made up of indigenous bankers, moneylenders, traders, commission agents, etc…
some of whom combine money lending with trade and other activities. Then there are the co-
operative credit institutions set up mainly with a view to supplanting the indigenous sources,
particularly the money lenders. These co-operative institutions are liberally assisted by the central
bank and are being brought into closer contact with the commercial banks. Generally speaking,
these two sectors in the market, those institutions which come directly or indirectly under the
broad regulations of the central bank constitute the organized sector, while the other, which fall
completely outside the purview of the central banking regulation, make up the unorganized
sector.

The organized sector of the money market is corporately well-developed in terms of organized
relationship and specialization of functions. It more or less centers round the central bank and the
commercial banks associated with it. The policies and operation of the commercial banks are
governed by the central bank and are also depended on it for direct financial assistance. In fact, a
substantial portion of the funds which co-operative credit agencies lend out is provided by the
central bank. Financial intermediaries derive most their recourses from the central bank. The
policies of these financial intermediaries are enunciated with the approvals of the central bank,
even the personnel of some them are inter bank call money market, which is regarded as the
core of the money market. Although the magnitude of funds dealt in this market is not large in
relation to the deposit resources of banks, perhaps this is the most sensitive sector of the money
market then there are the treasury bills of exchange, which absorb the surplus liquidity of the
institution in the organized sector.

Unorganized sector

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As regards the agencies constituting the unorganized money market, it is necessary at the outset
to clarify one important point regarding the nomenclature used to designate them. The term
unorganized money market conveys the impression that indigenous agencies providing credit
have neither any system nor any organization among themselves, nor any definite procedure
regulating their lading practices. In fact, these agencies have been functioning for ages in almost
all parts of the globe, and have a time tested organization. They follow well set pattern, both as
regards their lending policies and their interest rates.

Dealers in Indian money market

Types of dealers

There are two types of dealers in the money market, vis-à-vis. primary dealers and satellite
dealers. The main objective of the primary dealers are enhancing liquidity of the money market,
become underwriters and market makers for government securities, activities the secondary
market for government securities and aid the RBI in open market operations.

Primary dealers

The reserve bank of India introduced a system of primary dealers (PDs) in government securities
market in 1995. One of the prime characteristics of any financial market is liquidity. And in case of
the money market, which provides short term funds there should be greater level of liquidity. As
the various instrument traded in Indian money market did not have an active secondary market.
Primary dealers (PDs) were introduced into the market to develop the same.

Objective of primary dealer

• Strengthen the infrastructure facilities of the money market in order to enhance its
liquidity and broad base its operations.

• To gradually take up the role of the RBI as an underwriter and market make to the G-sec.

• To activate the secondary market for G–sec and thereby enable price discovery and
enhance liquidity and turnover. These operations should widen the investor base by
encouraging voluntary holding of government securities.
• To aid the RBI in conducting open market operation.

List of primary dealers in India

 Discount and finance house of India

 Securities trading corporation of India ltd.

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 ICICI securities and finance company ltd.

 Gilt securities trading corporation ltd.

 PNB gilt ltd.

 SBI ltd.

 Ceat financial services ltd.

 ABN AMRO securities (India) ltd.

 JP Morgan securities India pvt ltd.

 Tata td waterhouse securities ltd.

 Deutsche securities (India) pvt ltd.

 DSP Merrill Lynch ltd.

 Kotak Mahindra Capital Company.

 IDBI capital market services ltd.

 Corp bank securities ltd.

These are some of the major primary dealers that are situated in India which control the activities
of the primary dealer efficiently and effectively. Some of them are foreign dealers who have come
to India for a place in the market and to gain foreign exchange out of it.

Satellite dealers (SD)

Satellite dealers support the organizations of the primary dealers. The SDs is introduced to
enable better trading and distribution of the government securities. The satellite dealers have a
standing arrangement with the RBI based on the execution of an undertaking and the registration
letter issued by the RBI which describes the role and responsibilities of SDs. A satellite dealers
was also required to maintain capital adequacy standards as prescribed by the RBI for non-
banking financial companies and residuary non-banking companies subject to the requirement.

Objective of satellite dealers


To further strengthen the infrastructure in the government securities market by including
intermediaries that have good distribution channels and thereby increase the depth of secondary
market trading and widen the investor base.
To enhance liquidity and turnover in government securities.
To strengthen the distribution channels and provide a retail outlet for government securities,
thereby encouraging voluntary holding of government securities amongst wider investor base.

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Indian money market regulatory framework

The reserve bank is the monetary authority of India and the public debt manager of the
government. The development and regulation of money markets in the Indian financial system is
an important function of the reserve bank. In the context of regulatory powers of the RBI,
amendments to the securities contract (regulations) Act (SCRA)that were introduced from 1 st
march 2000 and have significant importance because they defined the regulatory jurisdiction of
the reserve bank over activities in the government securities market, money market, gold related
securities transaction, derivative market and ready forward contracts in all debt securities.

For the past few years the RBI has been trying to develop a proper short term rupee yield curve
with deep liquidity in the money markets. The strategy thus passes through the following stages.

• Introduction of LAF (liquidity adjustment faculty) to control the short term interest rates
within a certain range.
• Making the call money market as pure interbrain market by gradually withdrawing the non
bank participants.
• Rationalizing of the traditional sector specific refinance scheme and introducing of market
based recourse to RBIs standing liquidity facilities.
• Broadening the other segment of the money market, especially the repot market by
allowing the non banks to participate in the lending and borrowing activities.

Originating as an informal market for the short term requirement. The Indian money market has
come a long way by adding greater dimension to operations / transaction .like the other overseas
markets; the Indian market is affected by the various policies.

Discuss below are the measures that may indirectly affect the money market-

Changes in CRR
A cut in the CRR enhances loan able funds with the banks and reduces their dependence on the
call money market. It also brings down the call rates. On the contrary, when the CRR is
increased, the liquidity in the system goes down. Consequently the banks have to reduce their
credit operations. And those banks which do not have enough funds to meet the CRR either have
to borrow from the market or raise additional deposits. It is difficult to raise funds during a liquidity
crunch. Hence there may also be an increase in the interest rarest.

3.2 Changes in SLR

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The changes in SLR will have to be examined in two different situations:
1) Banks maintain SLR investment just up to the amount necessary.
2) The SLR securities that are maintained are in excess of the statutory prescriptions.

Consider the first case along with an increase in the SLR. This will reduce the liquidity of the
banks since there will be transfer of assets in the form of cash into securities and as the demand
for the SLR securities increases, their prices will increases thereby reducing the yields earned on
them. Now, if the first case exists and there is a decrease in the SLR requirement, then the bank
will have an excess investment in the SLR securities.

Disinvesting the same may not be profitable since there will be more sellers. This will bring down
the prices of the securities while increasing its yields. In the second case, when the banks
maintain excess of SLR securities, an increase in SLR will not have a significant impact on the
liquidity, prices and yields of the instrument. Likewise, when there is a decrease in the SLR, there
might not be much effect on the liquidity, prices and yields of the instrument since banks tend to
keep excess SLR securities. However, in the long run, there may be increases in the liquidity.
Excess SLR investments will enable the banks to present better capital adequacy ratios and also
since the government securities are now market determined, the yields offered by them would be
encouraging.

Monetary policy

Monetary policy plays a crucial role in modeling the economic character of a country. Money and
credit exercise a vital influence upon the course, nature and volume of economic activities in the
economy. An appropriate monetary policy can significantly help to achieve economic growth by
adjusting the money market supply to the needs of growth by directing the flow of funds into the
desired channels and by making institutional credit available to the specific fields in the economy.
Monetary policy can also help in correcting ills of the economy such as inflation & deflation. The
strength of the effectiveness of monetary policy is measured by its magnitudinal dimension while
the lags involved in its effectiveness are measured by the dimension of the policy. The strength of
monetary policy is determined by the elasticity as well as the degree of stability of functional
relations .i.e. monetary and real. It is observed that the strength of the monetary policy is
inversely related to the interest rate elasticity of demand for money assets. But, it is directly
related to the interest rate elasticity of demand for real assets. The knowledge of the time
dimension of a monetary policy is of great help in prescribing the appropriate timing of the policy
action.

Monetary policy in any country is largely determined by the institutional framework and

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environment in which it is expected to operate. It is necessary modeled by the world in which it
takes shape. The structure of the money market is the base on which depends the operations of
the monetary policy. Monetary management is largely governed by such institutional factors as
the use of credit, credit consciousness of the people and their preference, the general banking
structure and development of the banking habit among the people as a whole. any effective
organization and the response of financial institution in general and banks in particular depend
upon the nature of the organization of the money market is, therefore, a base for introducing
monetary discipline and for implementing monetary policies in any economic system. One of the
most remarkable feature in all discussion on central banking is the unanimity with which all writers
regard a developed money market as essential for the effective functioning of the central bank.

Role of Reserve Bank of India

The first thing to which the Reserve bank of India has to assign top priority is the introduction of
effective monetary management and the co-ordination of the money market with a view to
bringing indigenous bankers within the fold of its central banking policy. Even before the reserve
bank was established, the central banking enquiry committee considered it to be a matter of
paramount importance. It had recommended the development of direct links between
moneylenders and the reserve bank of India, in the same way in which it had established links
with the joint stock banks. Such indigenous banker as are engaged in banking properor are
prepared to shed their business other than banking should be eligible to be placed on the
approved list of the reserve bank in the same manner as joint stock bank. Some of the provincial
banking enquiry committee had also suggested that-

1) indigenous banker should be linked with the central banking institutional,


2) They should be treated as member banks on the approved list of banks ,
3) Commercial banks might discount their bills more easily and
4) Indigenous bankers should be licenced.

The scheme suggested by the central banking enquiry committee was that reserve bank should
prescribe a standard which indigenous bankers must follows before they are given the
concession. The maintenance of proper books of accounts in the recognized manner and the
submission of these books to the reserve bank for inspection and audit were two of important
eligibility conditions.

Although commercial banks are accepted to pay much greater attention than they did in the past
to the needs of small borrowers of various types, it is unlikely that they will be able to displace
indigenous bankers altogether. The banking commission does not think that such displacement is

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ever possible or practicable. A more useful course would be to adopt measure which would
enable these agencies to work in conformity with the overall credit policy of the reserve bank.
The reserve bank of India is the central bank of the country, in order to exercise effective
monetary management; the bank has to introduce monetary discipline in the money markets. In
this connection, its first and foremost task has been to consolidate commercial banking and
extend banking facilities in the country. The mergers introduced by the bank since 1970 should
be strengthened and extended to more scheduled and non scheduled banks, particularly to those
that are sick. The branch expansion programme should be planned so as to meet the needs of
various regions. The state banks and its associates should be merged, the nationalized banks
should be reorganized into viable units, and the links between the state bank and commercial
banks should be codified. Again, the Reserve bank should acquire powers to control the other
financial institutional in the country which substantially influence the money market. A direct link
between the unorganized and organized money market must be established. Co-operative banks
should be brought within the full control of the Reserve bank. Only then the central bank will be
able to implement its monetary policy more effectively.

Risk exposure in money market instruments

Apart from ensuring appropriate liquidity, investor should also consider the risks present in the
money market investments. Investments in the money market are basically unsecured in nature.
While the unsecured nature does indicate a higher risk, the risks associated with money market,
however, are not necessarily due to the unsecured nature but more due to the fluctuations in the
rates. The level and the type of risk exposure that can be associated with money market
instrument/investment are discussed below:

Market risk/interest risk

These risks arise due to the flucations in the rates of the instruments and are of prime concern in
money market investment. Due to the large quantum of funds involved in the money market
deals, and the speed with which these transaction are executed, the value of the asset are
exposed to fluctuations. Further, if these fluctuations are wide, it may lead to a capital loss/gain
since the price of the instrument, including the government securities, declines. This risk can be
minimized by enhancing liquidity since easy exit can help curb the capital loss.

Reinvestment risk

Reinvestment risk arises in a declining interest rate scenario. Investors who park their funds in
short term instrument will, at the time of redemption, have to reinvest these fund at lower rate of

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interest and since the existing securities will be having higher coupons / YTMs, their value
generally rises in such situations to bring down the yields. All money market instruments are
exposed to this risk.

Default risk

Lending decisions primarily focus on assessing the possibility of repayment since the first risk that
the lender will be exposed to is the default risk. Except for the sovereign securities, all other
investment / lending activities have the probability of default by the borrower in the repayment of
the principal or interest. It is due to the absence of the default risk, that the government securities
are considered as risk free securities.

Inflation risk

Due to the inflation, the average prices for all goods and services will rise thereby reducing the
purchasing power of the lender. The risk that arises due to the inflationary effect is known as
inflation risk / purchasing power risk. All money market instruments are exposed to this risk.
Lenders will generally ensure that their contractual rate of interest offsets this risk exposure.
Though the capital market has designed instrument to hedge against risk this risk, they are yet to
be introduced into the money market. However, considering the short term nature of the money
market instrument, their level of exposure to this inflation risk can be minimal when compared
with other long term instruments.

Currency risk

A risk of loss is inherent in the multi currency dealing due to the exchange rate
flucations.currency risk refers to this type of risk exposure. The money market players operating
in overseas money market instrument will be exposed to this risk. Also, when the institutional
investor like banks sells foreign currencies to play in the money market, they may be exposed to
currency risk.

Political risk

Most of the measures adopted to bring economic stability will have direct / indirect implications on
the money market instrument and operations. This is due to the fact that the money activity

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reflects the money market activity reflects the money supply position in the economy, the interest
rate and the exchange rate structures etc…thus, any policy decision adopted by the central
government will have an impact on the money market. In the Indian context, it is the policy
measure taken by the RBI and sometimes the ministry of finance that have an impact on the
money market.
CALL/NOTICE MONEY MARKET

Call / Notice money market is the most active segment of the money market. The market is meant
for the transfer of funds among the banks. It consists of an arrangement for making the
surpluses of some banks available to the other banks in temporary deficit of the cash.
Hence, it is known as inter-bank call / notice money market. The call loan is one day or
overnight loan and the short notice loan is for a short period of up to 14 days. The
borrowers in the market are the banks who are temporarily short of funds and the lenders
who are temporarily in excess of cash. It is also the focal point through which the Central
Bank attempts to influence the short term interest rates.

Advantages

High liquidity
Money lent in a call market can be called back at any time when needed so, it is highly liquid. It
enables commercial banks to meet large sudden payments and remittance by making a call on
the market.

High profitability
Banks can earn high profits by lending their surplus funds to the call market when call rates are
high and volatile. It offers a profitable parking place for employing the surplus funds of banks
temporarily.

Maintenance of SLR
Call market enables commercial banks to maintain their statutory reserve requirements.
Generally banks borrow on a large scale every reporting Friday to meet their SLR requirements.
In the absence of call markets, banks have to maintain idle cash to meet reserve requirements.

Safe & Cheap


Though call loans are not secured, they are safe since the participants have strong financial
standing. It is cheap in the sense brokers have been prohibited from operating in the call market.
Hence, banks need not pay brokerage on call money transaction.

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Assistance to Call Central Bank Operations
Call money market is the most sensitive part of the any financial system. Changes in demand and
supply of funds are quickly reflected in call money rates and it gives an indication to central bank
to adopt an appropriate monetary policy. Moreover, the existence of an efficient call Markey helps
the central bank to carry out its open market operation effectively and successfully.

Drawbacks

Uneven developments

The call money markets are normally confined to only big industrial and commercial cities.
Generally call markets are associated with stock exchanges. Hence the market is not evenly
developed.

Lack of integration
The call markets in different centre are not fully integrated. Besides, a large number of local call
markets exist without any integration.

Volatility in call money rates


Call rates vary to a greater extent in different centers in different seasons on different days within
fortnights.

Operations in call money market

Borrower and lender in call market contact each other over telephone. Hence, it is basically over
the telephone market. After negotiations over the phone, the borrowers and lenders arrive at deal
specifying the amount of loan and the rate of interest.

Call loan market transaction and participants

In India, call loans are given for the following purposes:

i) To commercial banks to meet large payments, large remittance, to maintain liquidity with the
RBI and so on.
ii) To the stock brokers and speculators to deal in stock exchange and bullion markets.
iii) To the bill market for meeting matured bills.
iv) To the discount and finance house o f India the securities trading corporation of India to
activate the call market.
v) To individual of very high status for trade purpose to save interest on O.D. or cash credit.

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Call Money Rates
As the money rates fluctuate widely, the call / notice money market is described as the most
volatile market. The rates fluctuate depending upon the demand and supply position of liquid
funds with the banks. The Indian Money Market and the business of the banks in particular is
exposed to seasonal variations in terms of more demand of bank funds during the “busy” season
and reduced requirement of bank credit in the slake position. In accordance with the seasonal
charges, the market experiences tight liquidity conditions during the “busy” season and the
pressure of excess demand pushes the call rate up and the excess supply along with the reduced
requirement of bank credit in the slack sensor pulls the rate down.

CRR Requirements

CASH RESERVE RATIO (CRR) donates the cash reserves maintained by banks with the central
bank. The bank reports to the central bank their position regarding the CRR every alternate
Friday. The bank borrows funds from the call money market to meet their specific CRR
requirements and their demand for call money market is lower when requirements have been met
on the reporting Friday.

Funds Management by Banks

As a part of their funds management the banks undertake investments in financial assets which
improve their earnings, but reduce their liquidity position. The banks take recourse to the call
money market to ensure their liquidity status.

TREASURY BILLS MARKET

Treasury bill market is an important segment of money market. Finance bills that are issued by
the government for a fixed period upto one year are designated as ‘treasury bill’. Treasury bill
(TBs) do not arises from genuine commercial transactions. However, they command high
liquidity. TBs are used by the central monetary authority for the purpose of infusing liquidity into
the economy. TBs are two types namely, ordinary TBs and AD hoc TBs. where as ordinary T-bills
are issued to individual, firms, banks and others, ad-hoc TBs are issued only in favour of RBI.
Participants in TBs markets includes central bank, other commercial banks, etc…
Sale of TBs by the central bank involves the issue of notification, tendering and auctioning. The
biggest advantage of TBs is that they are highly liquid and do not have default risk. Besides, TBs
provide SLR advantage to banker. As an effective fund management tool, TBs offer ready
market, besides offering rediscounting facility from the central bank. TBs are ideally suited for
investment of temporary surplus. Buyback of TBs helps meet the temporary difficulties of funds.

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Treasury Bills are the main instruments of short term borrowing by the governments.

Treasury Bills are highly liquid and have assured yield and no risk of default.

They are issued by the central bank on behalf of the Central Government.

Treasury Bills are issued at a discount. The discount is the difference between the price at which
Treasury Bills are sold and their redemption value.
The price is lower than its face value by the amount of interest due on the bills.

History

It was the year 1877 that treasury bill (TBs) came to be issued for the first time in the world. Later,
it acquired wide popularity around the world both in developing and developed countries. TBs
were first issued in India in October 1917.The issue aimed at raising resources for financing the
First World War efforts of the government and mopping up excess liquidity in the economy due to
heavy war expenditure.

TBs that were initially sold by the government had a maturity period of 3 months, 6 months, 9
months and 12 months. Later on, with the setting up of the RBI in 1935, the issue profile of TBs
underwent a lot of changes. Accordingly, RBI came to issue two types of TBs such tap bills that
were issued at all times and intermediate bills that were sold between auction, to non
-government investors. However, in the year 1965, sale of TBs to public through auction was
suspended and issued took place on tap basis at a discount. Thus commercial banks began to
invest in them.

Purpose

Treasury bills are raised to meet the short term requirement of government of India. As the
government revenue collections are bunched and expenses are dispensed, these bills enable the
government to manage cash position in a better way. T-bills also enable the central bank to
perform open market operations (OMO) which indirectly regulate money supply in the economy.
Investor prefers treasury bill because of high liquidity, assured returns, no default risk, no capital
depreciation and eligibility for requirement.

Method

Auctioning is method of trading whereby bid against one another and where the securities are

16
sold to the highest bidder. This system was introduced in 1992, for sale of dated government
securities. A number of instrument of wide raging period i.e.14 days, 91 days and 364 day
treasury bills and dated securities of the government are sold. Bidders have to furnish written ad
sealed quotation of auction such as multiple price auction and uniform price auction. under the
multiple price auction, mechanism every bidder gets allocation according to his bid and the issuer
collects a premium from all bidders by quoting a rate lower than the cut off yield. Under the
uniform price mechanism competitive bids are accepted on basis of the minimum discounted
price known as the cut off price. The price of the bill is determined at the auction. This minimum
price is independent of the bid prices tendered below or at the cut off price.

Yield

T-bills do not carry a coupon rate, but they are issued at a discount. Though the yields on T-bills
are less when compared to other money market instrument, the risk averse investor and banks
prefer to invest in these securities. Yield on T-bills are considered as benchmark yields. It is
considered as a representative of interest rates in the economy in general, while arriving at an
interest rate or yield on any short term instrument.

Participants in the Treasury market

Though various groups of investors including individual are eligible to invest, the main investor
found in treasury bills are mostly banks to meet their SLR requirements. Other large investors
include:

• Central Bank

• Commercial banks

• State governments

• Discount houses

• provident funds (as per investment guidelines)

TREASURY BILL RATE

Treasury Bill rate is the rate of discount at which the Treasury Bills are sold by the Central Bank.
In case of 91-days Treasury bill, the rate is fixed by the central bank and at such low level as
4.6% per annum since 1974.The rate in case of other Treasury Bills is not administered. It is
market determined, but central bank fixes the floor price.

17
The low Treasury bill rate has kept the interest cost to the government in respect of Treasury Bills
debt very low. Due to low rate of return on Treasury Bills, the non banking financial institutions,
corporate and other firms are disinclined to invest their surpluses in these bills.

Funding Of Treasury Bills & Monetary Policy

Funding means extension of government debt. The funding of Treasury Bills in the country is
confined to the "ad hoc" Treasury Bills only. Funding of Treasury bills means their conversion into
government securities. It is argued that the funding may have a favorable impact on monetary
policy to the extent government securities coming in to being as a result of funding help to
contract the credit creating capacity of the banks.
The central Bank has to purchase whatever ad hoc Treasury Bills are sold to it by the
Government and also rediscount whatever amount of these bills are presented to its
rediscounting window by banks and others. This has an effect on monetization of government
debt which is main source of excessive expansion in money supply. The large holdings of
Treasury bills by banks results, on the one hand, in reduction in bank cash and thereby in their
credit - creating capacity, but, on the other hand, indicate a potential danger for the monetary
policy.

CERTIFICATES OF DEPOSIT

After treasury bills, the next lowest risk category investment option is the certificate of deposit
(CD) issued by banks and FIs.
The certificate of deposit is a document of title similar to a time deposit receipt issued by a bank.
It is a bearer document readily negotiable. It is beneficial to the banker as well as investor. The
banker is not required to encash the CD before the date of maturity and hence it is an assured
fund for a minimum period. Certificate of deposit represents the bank deposit which is
transferable from a person t o person. It is a marketable or negotiable short term instrument in
bearer form. CD is an interest bearing, maturity dated obligation of bank. It is a part of banks time
deposit. It is negotiable because it is payable either to the bearer or to the order of the depositor.
It can be sold to any one or it can be traded on the secondary market. Liquidity and Marketability
are the distinguishing feature of CD. They are risk less in terms of default of payment of interest
and principal.
CDs are obligation of banks. They are usually issued at face value on which fixed rate of interest
is paid. They are traded on a bond –yield equivalent basis. The CDs are also issued at a discount
on its face value like treasury bills or commercial bills. Banks can issue or sells CDs either directly
or through dealers. They may be issued on the initiative of secondary market dealers. CDs are

18
issued by banks, particularly by large banks for attracting large corporate deposits. Thus, the
major holders of CDs are cash rich business firms of varying sizes and money funds. The
government, central bank, non-bank financial institution and individual can also buy CDs. Bank
themselves may buy and sell CDs in the secondary market but they are reluctant to invest in
them. Many firms tend to hold CDs till maturity and hence the development of secondary market
has not been taking pace in India.
The secondary market for this instrument does not have much depth but the instrument itself is
highly secure. CDs are issued by banks and FIs mainly to augment funds by attracting deposits
from corporate, high net worth individuals, trusts, etc. the issue of CDs reached a high in the last
two years as banks faced with reducing deposit base secured funds by these means. The foreign
and private banks, especially, which do not have large branch networks and hence lower deposit
base use this instrument to raise funds. The rates on these deposits are determined by various
factors. Low call rates would mean higher liquidity in the market. Also the interest rate on one-
year bank deposits acts as a lower barrier for the rates in the market

Feature of certificate of deposit ---


Document of title to time deposit.
Unsecured negotiable.
Freely transferable by endorsement and delivery.
Issued at discount to face value.
Repayable on a fixed date without grace days.
Subject to stamp duty like the issuance promissory notes.

Advantage of CDs

1) Certificate of deposits is the most convenient instrument to depositors as they enable their
short term surpluses to earn higher return.

2) CDs also offer maximum liquidity as they are transferable by endorsement and delivery. The
holder can resell his certificate to another.

3) From the point of view of issuing bank, it is a vehicle to raise resources in times of need and
improve their lending capacity. The CDs are fixed term deposits which can not be withdrawn until
the redemption date.

4) This is an ideal instrument for banks with short term surplus funds to invest at attractive rates.

19
Transfer of certificate of deposit

CDs held in physical form are freely transferable by endorsement and delivery. CD held in the
demat form can be transferred as per the procedure applicable to other demat securities.

Yield on CDs
The yield on CDs is determined by market forces and banks own credit ratings. The yield is
higher on CDs of higher denominations and of longer maturities. The yield can be fixed through
negotiation in the primary market. It can not be controlled in the secondary markets. The yield on
CDs is higher than that on treasury bills. There is a possibility of loss to the holder if interest rates
are expected to increase.

Commercial paper

Commercial Paper is a form of promissory note negotiable by endorsement and delivery. It is a


fixed term promissory note with a fixed maturity issued mostly by leading, reputed, creditworthy,
and highly rated companies. It may be issued at discount at discount if the issuing company
wants to do so. The form of commercial paper has been prescribed by the central bank.
Commercial Paper is also known as Industrial Paper, Finance Paper or a Corporate Paper. The
name depends on the nature of the liability.

Commercial paper is an unsecured instrument. It is backed by the general credit standing of the
issuing companies. They sustain the line of credit from the banks. These CPs are suitable by
endorsement and delivery. They are regarded as highly safe and liquid instrument. They are
simple and flexible instrument. The documentation is simple, easy, and cheaper. CPs is like
Treasury Bills. The CPs normally has a buy-back facility. The issuers can buy-back their CPs if
they need.

Rating requirement for issuance of CP in India

All eligible participants shall obtain the credit rating for issuance of Commercial Paper either from
Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit
Rating Agency of India Ltd. (ICRA) or the Credit Analysis and Research Ltd. (CARE) or the
FITCH Ratings India Pvt. Ltd. or such other credit rating agency (CRA) as may be specified by
the Reserve Bank of India from time to time, for the purpose.

The minimum credit rating shall be P-2 of CRISIL or such equivalent rating by other agencies.

20
The issuers shall ensure at the time of issuance of CP that the rating so obtained is current and
has not fallen due for review and the maturity date of the CP should not go beyond the date up to
which the credit rating of the issuer is valid.

Maturity
CP can be issued for maturities between a minimum of 15 days and a maximum upto one year
from the date of issue. If the maturity date is a holiday, the company would be liable to make
payment on the immediate preceding working day.

The limit up to which a CP can be issued.

The aggregate amount of CP from an issuer shall be within the limit as approved by its Board of
Directors or the quantum indicated by the Credit Rating Agency for the specified rating, whichever
is lower.

As regards FIs, they can issue CP within the overall umbrella limit fixed by the RBI i.e., issue of
CP together with other instruments viz., term money borrowings, term deposits, certificates of
deposit and inter-corporate deposits should not exceed 100 per cent of its net owned funds, as
per the latest audited balance sheet.

Who can issue Commercial Paper (CP)

Highly rated corporate borrowers, primary dealers (PDs) and satellite dealers (SDs) and financial
institutions (FIs) which have been permitted to raise resources through money market
instruments under the umbrella limit fixed by central bank are eligible to issue CP.
However; investment by FIIs would be within the limits set for their investments by the governing
body.

Dematerialized form

CP can be issued either in the form of a promissory note (Schedule I) or in a dematerialized form
through any of the depositories approved by and registered with the governing body. Banks, FIs,
PDs and SDs are directed to hold CP only in dematerialized form.

CP will be issued at a discount to face value as may be determined by the issuer. No issuer shall
have the issue of Commercial Paper underwritten or co-accepted.

Repo Market

Repos, short for repurchase agreements, are contracts for the sale and future repurchase of a
financial asset, most often Treasury securities. On the termination date, the seller repurchases
the asset at the same price at which he sold it, and pays interest for the use of the funds.

21
Although legally a sequential pair of sales, in effect a repo is a short-term interest-bearing loan
against collateral. Repos are widely used for investing surplus funds short term, or for borrowing
short term against collateral. Dealers in securities use repos to manage their liquidity, finance
their inventories, and speculate in various ways. The Fed uses repos to manage the aggregate
reserves of the banking system.

The annualized rate of interest paid on the loan is known as the repo rate. Repos can be of any
duration but are most commonly overnight loans. Repos for longer than overnight are known as
term repos. There are also open repos that can be terminated by either side on a day’s notice.
In common parlance, the seller of securities does a repo and the lender of funds does a reverse.
Because money is the more liquid asset, the lender normally receives a margin on the collateral,
meaning it is priced below market value, usually by 2 to 5 percent depending on maturity.

The overnight repo rate normally runs slightly below the Fed funds rate for two reasons: First a
repo transaction is a secured loan, whereas the sale of Fed funds is an unsecured loan. Second,
many who can invest in repos cannot sell Fed funds. Even though the return is modest, overnight
lending in the repo market offers several advantages to investors. By rolling overnight repos,
they can keep surplus funds invested without losing liquidity or incurring price risk. They also
incur very little credit risk because the collateral is always high grade paper.

Repos are not for Small Investors

The largest users of repos and reverses are the dealers in government securities. The balance
sheet of a government securities dealer is highly leveraged, with assets typically 50 to 100 times
its own capital. To finance the inventory, there is a need to obtain repo money in large amounts
on a continuing basis. Big suppliers of repo money are money funds, large corporations, state
and local governments, and foreign central banks. Generally the alternative of investing in
securities that mature in a few months is not attractive by comparison. Even 3-month Treasury
bills normally yield less than overnight repos.

Clearing Banks and Dealer Loans

If the dealer is short on funds needed to repurchase the securities, the clearing bank will advance
them with little or no interest if repaid the same day. Otherwise the bank will charge the dealer
interest on the loan and hold the securities as collateral until payment is made. By rolling over
repos day by day, the dealer can finance most of his inventory without resorting to dealer loans.
It is sometimes advantageous to repo for a longer period, using a term repo to minimize
transaction costs.

Clearing banks charge a fee for executing dealer transactions. They prefer not to issue large

22
dealer loans because it ties up the bank’s own reserves at little profit.

Commercial Bill Market

Purchase and discounting of bill of exchange is another way of employing bank funds. The
amount of working capital required by companies is mainly provided by banks through cash
credits, overdrafts and purchase or discounting of commercial bill. Bills of exchange and
promissory notes are negotiable instrument which enable the debtors to discharge their
obligation towards their creditors. A commercial bill or bill of exchange is a short term,
negotiable and self-liquidating money market instrument which evidences the liability to
make a payment on a fixed date when goods are purchased on credit. It is an asset with
high degree of liquidity and low degree of risk. Bill finance is one of the major types of
finance provided by banks in the foreign countries. The bill market in India is
underdeveloped. The share of bill finance in the total bank credit is very small. It has been in
the range of 8 to 22%. There is no continuous and substantial supply of bills.

Benefits of bill financing

Following are some of the major advantage to the banks providing bill finance:

• Self liquidating mode of financing


• Liquidity management of the banks becomes easier

• Easy to monitor the genuineness of the transactions

• Monitoring of borrowers receivables becomes easy


• Quality of receivables can be ascertained

• Bank has recourse, both to the drawer as well as the drawee.

• Sale transaction are routed through the bank


• Effective yield is higher since discount is deducted upfront
• Bank earns fee-based income
• Facility of rediscounting
• Disciplined way of financing

Kinds of bill of exchange

The bills of exchange or promissory note may be payable either on demand or after fixed time. It
is payable on demand when it is expressed to be payable “on demand” or “at sight” or on
presentment, or no time for payment is specified in it. A bill of exchange may be payable at
affixed period after its due date or after sight or after an event which is certain to happen.

23
Trade bill and accommodation bill

When bill of exchange is drawn by a seller (creditor) on the buyer (debtor) in respect of genuine
trade transaction, it is known as a trade bill. Such bill are drawn and accepted for consideration
but for providing financial accommodation of the parties is known as accommodation bill. The
accommodation bill does not arise out of genuine trade transaction. Such bills are not accepted
by the government departments and they do not have the status of a negotiable instrument.

Clean and documentary bill


A bill of exchange accompanied by a document of title to goods or any other document is known
as documentary bill. In case of home trade, the drawer of a bill delivers to the banker along with
the bill, a railway receipt and in case of foreign trade; the bill is accompanied by a bill of lading.
The documents are delivered by the banker to the drawee of the bill against payment or
acceptance. If there is no such document attached to a bill, it is called a clean bill.

Inland and foreign bills


A bill drawn in India and made payable or drawn upon any person resident in India is called
inland bill. On the other hand a bill of exchange is called foreign bill, if it is drawn in India but
payable outside India or drawn on a person residing outside India, or if it is drawn outside India
and payable in India or is drawn on a person residing outside India and is payable in India.

Money market mutual fund

Money market mutual funds are special type of mutual funds which invest only in high quality
money market instrument of short term nature. The new money market instrument are certificate
of deposit, the commercial paper, treasury bills etc…scheduled commercial banks and their
subsidiaries are allowed to set up money market mutual funds to provide additional short term
avenue to investor and to bring money market instruments within the reach of individual and small
investor/organization. Individual and other bodies are allowed to invest their money market
mutual fund in the form of negotiable instrument and deposit accounts. The funds mobilized by
MMMFs are not subject to reserve requirements because these funds are in turn invested in
money market instruments. The detailed operating guidelines are framed by the task force of
representation of banks the reserve bank of India. Money market funds are divided into two
categories: taxable and tax free. If you're buying a taxable fund, any returns from the fund are
generally subject to the regular local, state and federal taxes.

Money market funds are special for three reasons:

24
1. Safety – The instruments that these funds invest in are by and large some of the most
stable and safe investments. Money market instruments provide a fixed return with short
maturity. By purchasing debt securities issued by banks, large corporations and the
government, money market funds carry a relatively low default risk while still offering high
returns in comparison to similar low-risk/liquid products.
2. Low Initial Investment – Money market instruments generally have large minimum
purchase requirements, thereby disqualifying the majority of personal investors from
buying them. Money market funds, on the other hand, have substantially lower
requirements, which are sometimes even lower than average mutual fund minimum
requirements.

3. Fixed Net Asset Value – The NAV for money market funds is usually fixed at a constant
value, giving investors more flexibility than most mutual funds, which have a transaction-day-
plus-three (T+3) settlement. Money market funds offer investors a same-day settlement
similar to regular money market instruments

Before buying a money market fund, one should be aware of a couple of things.

 Management expense ratio - As with regular mutual funds, money market funds
also have management expense ratios. Fund managers and companies need to be paid
for their work, and they take their pay out of the return from the fund.

 A money market fund is never risk-free - Make sure you read the prospectus of
the fund before you purchase it to make sure that you are investing in securities that are
compatible with your risk profile.

Money Market and Capital Market

Similarities-
In many respect, both money market and capital market exhibit similar characteristic as specified
below:

• Transfer of resources:
Transfer of resources takes place from surplus units to deficit units both money market and
capital market.

• Commercial banks:
Commercial banks provides both short term and long term finance and therefore take an

25
active part in the money market as well as capital market.

• Liquidity adjustment
Non banking financial institutions and special financial institution approach money and capital
markets to a limited degree in order to adjust their liquidity positions. Besides, financial
institution operate on both sides of the market, borrowing and lending and participate in both
money and capital market.

• Flow of funds
A lenders and borrowers of funds have access to both capital and money market; there is a
substantial flow of funds between capital and money market.

• Preference of investor
Preference is available for most of supplier of the funds to operate in both markets, as
investors simultaneously invest in various investment avenues such as savings banks, units,
fixed deposit, national savings certificate scheme, life insurances, government and industrial
securities ,real estate bullion etc…

• Interest rates
There is an interdependency of short and long term rates of interest. This is because; rise in
the interest rate in money market influences long term interest rates also.

Distinction

A money market is different from a capital market in the following respect-

26
SL.NO. POINT OF DIFFERENCE CAPITAL MARKET MONEY MARKET

1 Term finance provides long term funds provides short term funds

2 Nature of capital Capital used for fixed and Capital usually used for
working capital needs. working capital needs.
3 Main function mobilization and effective Lending and borrowing to
utilization through lending facilitate liquidity adjustment.

4 Main constituent Primary and secondary call money markets, treasury


market, with stock exchanges bills market, market for
acting as a bridge for buying certificate of deposit(cds) &
and selling of securities. commercial paper (cps)

5 Link Acts as a link between Acts as a link between


investor and entrepreneurs depositor and borrower.

6 Underwriting It is primary function. Not a primary function.

7 Institutions investment houses and commercial banks and


mortgage banks discount houses

SL NO. POINT OF DIFFERENCE CAPITAL MARKET MONEY MARKET


8
Development assistance Provided to central and state Provided to government by
government, public and local discounting treasury bills
bodies etc… etc…

9 Negotiation Funds are lent after a Dealings can take place


prolonged negotiation without any personal contact
between the lending financial and negotiations are not
institution and the borrowing formal.
corporate entity
10 Market place
Dealings are conducted Dealings can take without
through mechanism of stock any personal contact and
exchanges negotiations are not formal

11 Claims Bonds and shares Financial claims, assets and


securities

12 Risk High credit & market risk Low credit & market risk
27
Conclusion

The researcher wants to conclude here that the pre-requisite of any effective implementation of
the monetary policy is to have a developed, organized, co-coordinated and integrated money
market. In India, there are number of unorganized, underdeveloped and parallel money market.
With the assumption that the government in this country has the responsibility for overall direction
of the economy, and given the increasing role assigned to the public sector, fiscal policy clearly is
a major determinant of economic activity, but to proceed from this to the conclusion than an
appropriate fiscal policy is all that matters would be unwarranted. The primary aim of the RBI
operations in money market is to ensure that the liquidity & short term interest rates are
maintained at levels. Consistent with the monetary policy objective.
The money market reforms have been successful in bringing significant improvements in
various in various financial markets segments improving their depth,liquidity & efficiency. The
money market is now reasonably developed with wide array of instrument. The character of the
government securities market has charged from being a captive market to broad based,deep &
liquid market enabling the RBI to pursue its monetary policy through market based instrument in
various reforms measures have resulted in sharp growth of the foreign exchange market
reforms have also been successful in creating & sustaining orderly conditions in the market.
In recent years, the reserve banks approach has been to foster balance
development of different segment of the money market, introduce
New instrument, reduce dependence of participants on uncollateralized exposures, facilitate
price discovery in short end & upgrade payment system infrastructure.

Findings -
After The study of various aspect of money market & its instrument and by conducting
a field work in banks like State bank of India, ICICI Bank, Bank of India & it is to be noted that
presenting it self as a market of short term funds, money market should essentially incorporate
feature of adequate liquidity and minimum price flucation.
The Indian money market is not describe as sound market. There are some deficiencies
found like diversity in money rates of interest, no contract with foreign money market, limited
participants,seasonal strigency of funds.
The need for a money market arises because receipts of economic units do not
coincide with their expenditures. These units can hold money balances to insure that planned
expenditures can be maintained independently of cash receipts (that is, transactions balances in
the form of currency, demand deposits, or NOW accounts).
And therefore to enable the economic units to minimize this cost, they usually seek to

28
hold the minimum money balances required for day-to-day transactions. They supplement these
balances with holdings of money market instruments.

Recommendation –
Appreciating the role of money market in Indian economy, researcher here viewed that
money market the operation of monetary of policy the operation of monetary policy of the central
bank depends on the intentions of the regulating authorities and the degree of co-operation
extended by commercial banks,which must respond appropriately in carrying out the gigantic
work of planned economic development.the authorities must purse a positive policy to integrate
the organized,parallel and unorganized markets. The organized monetry market must be
consolidated and stregthenedthis aprt,there must be be the closest possible link and link and co-
ordination between the policies of the reserve bank and the varied institutions of the money
market.

The authorities should adopt a four fold strategy to develop money market and short
term yield with deep liquidity.

 The liquidity adjustment facility should be in operation that comprises of repo and
reverse repo opration where auction are conducted with a view to equilibrate
liquidity.

 Call money market must be developed as a pure interbank ,market.

 The traditional sector specific refinance support should be rationalized and liquidity
facilities should be made market based.

 Repo market should be developed along with lending as well as borrowing to give
access to banks.

A developed, co-ordinate & integrated money market is an asset to the economy


of the country,both in respect of development and in pursuning a sound monetary
management policy that is conductive to development.

Bibliography –

29
Indian financial system & financial market operation --Vasant Desai

Financial markets & institutions – DR. S. Gurusamy

Financial markets - P.K.Bandgar

Money markets –ICFAI

webliography

www.investopedia.com
www. google.com
www.tcs.com
www.banknet.com

Questionnaire

Project topic - Money Market in India

Name of Bank –

Name of official -

Date -

1. Is there any separate department in your bank for money market operations?

i. Yes No

2. According to you, Is there any recent development in the call money market?

i. Yes No

30
3. Is it true that, call market helps commercial bank to maintain statutory reserve
requirement?

i. Yes No

4. Is your bank investing in commercial paper?

i. Yes No

5. Explain the working of treasury department? Tell us about subsidiary ledger account
(SGL A/c)?

6. Who are the participanents in Treasury bill market?

7. Briefly state the issuing procedure of treasury bill?

8. How are the treasury bill used as an effective fund management?

9. Which method is used in treasury markets?

10. What is role of DFHI in Treasury bill market? ‘

31
11. briefly explain the call money market?

12. How is interbank participation scheme works?

13. How is the certificate deposit different from bank deposit?

14. Why is Repo and Reverse Repo issued by RBI?

15. How money market helps the government?

32

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