| The
money market can be defined as a market for short-term
money and financial assets that are near substitutes
for money. The term short-term means generally a period
upto one year and near substitutes to money is used
to denote any financial asset which can be quickly converted
into money with minimum transaction cost.
PARTICIPANTS
IN MONEY MARKET
Lenders:
These are the entities with surplus lendable funds like-
Banks (Commercial, Co-operative & Private)
Mutual Funds
Corporate Entities with bulk lendable resources of minimum
of Rs. 3 crores per transaction
Financial Institutions
Borrowers:
These are entities with deficit funds and includes the
ones as above.
FEATURES
OF MONEY MARKET
It is
a collection of market for following instruments- Call
money, notice money, repos, term money, treasury bills,
commercial bills, certificate of deposits, commercial
papers inter-bank participation certificates, inter-corporate
deposits, swaps, etc.
The sub markets have close inter- relationship &
free movement of funds from one sub-market to another.
A network of large number of participants exists which
will add greater depth to the market.
Activities in the money market tend to concentrate in
some centre, which serves a region or an area. The width
of such area may vary depending upon the size and needs
of the market itself.
The relationship that characterizes a money market is
impersonal in character so that competition is relatively
pure.
Price differentials for assets of similar type will
tend to be eliminated by the interplay of demand &
supply.
A certain degree of flexibility in the regulatory framework
exists and there are constant endeavours for introducing
a new instruments / innovative dealing techniques.
It is a wholesale market & the volume of funds or
financial assets traded are very large i.e. in crores
of rupees.
MONEY MARKET INSTRUMENTS
Some
of the money market instruments are :
Call/Notice
Money | Treasury
Bills | Term
Money | Certificates
of Deposits | Inter-Corporate
Deposits Market |
Commercial Papers Market |
Ready Forward Contracts |
Commercial Bills | Terminology
|
