Eco presentation1[2]

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Eco presentation1[2]

  1. 1.  Definition - As per RBI definitions “ A market for short term financial assets that are close substitute for money, facilitates the exchange of money in primary and secondary market“.
  2. 2.  Market for short-term financial instruments Maturities of one year or less, and often 30 days or less
  3. 3.  Trading takes place in large financial centres Companies and investors often use money market securities
  4. 4.  Money market instruments have low risk Core of the money market consists of interbank lending
  5. 5.  To provide a parking place to employ short-term surplus funds To provide room for overcoming short term deficits. To enable the central bank to influence and regulate liquidity in the economy through intervention in this market
  6. 6.  Development of trade & industry Development of capital market Smooth functioning of commercial banks Effective central bank control Formulation of suitable monetary policy Non inflationary source of finance to government.
  7. 7.  ORGANISED STRUCTURE 1. Reserve bank of India. 2. DFHI (discount and finance house of India). 3. Commercial banks i. Public sector banks SBI with 7 subsidiaries Cooperative banks 20 nationalised banks ii. Private banks Indian Banks Foreign banks 4. Development bank IDBI, IFCI, ICICI, NABARD, LIC, GIC, UTI etc
  8. 8.  II. UNORGANISED SECTOR 1. Indigenous banks 2 Money lenders 3. Chits 4. Nidhis III. CO-OPERATIVE SECTOR 1. State cooperative i. Central cooperative banks Primary Agri credit societies Primary urban banks 2. State Land development banks Central land development banks Primary land development banks
  9. 9.  Treasury Bills (T-Bills) Repurchase Agreements Commercial Papers Certificate of Deposit Bankers Acceptance Call money market Money Market Mutual Funds
  10. 10.  Treasur y Bills – Issued by the Indian government in 1917 They are short-term instruments One of the safest money market instruments They have 3-month, 6-month and 1-year maturity periods
  11. 11.  Repurchase Agreements – Also known as repos Repo transactions are allowed only between RBI-approved securities Repurchase agreements are sold by sellers with a promise
  12. 12.  Commercial Papers – First issued in the Indian money market in 1990. Promissory notes issued by companies and financial institutions Issued at a discounted rate of their face value Commercial papers yield higher returns than T- bills
  13. 13.  Cer tificate of Deposit – First introduced to the money market of India in 1989. A certificate or deposit is a short-term borrowing note in the form of a certificate It usually has a term between 3 months and 5 years The funds cannot be withdrawn on demand
  14. 14.  Bankers Acceptance – The terms for these instruments are usually 90 days, but this period can vary Companies use the acceptance as a time draft for financing
  15. 15.  Call money market – Maturity period varying from one day to 15 days Interest rate paid on call money loans is called Call Rate
  16. 16. Money Market Mutual Funds – In 1997, only one MMMF was in operation, and that too with very small amount of capital The RBI has approved the establishment of very few such funds in India
  17. 17.  Purchasing power of your money goes down, in case of up in inflation Absence of integration Absence of Bill market No contact with foreign Money markets. Limited instruments Limited secondary market Limited participants
  18. 18. THANK YOU

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