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Money market

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MEANING AND INSTRUMENTS OF MONEY MARKET

MEANING AND INSTRUMENTS OF MONEY MARKET


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  • 1. BY:- AMANPREET KAUR M.B.A – 1 ROLL-NO= 34 By PresenterwMedia.com
  • 2. What is Financial market?It is a mechanism which makes it possible forborrowers to obtain funds and for lenders tofind suitable outlets for their finance.
  • 3. Financial marketMoney Capitalmarket market
  • 4. What is Money market?It means market where money or its equivalentcan be traded.It includes short-term borrowing and lending withoriginal maturities of one year or shorter timeframes.Instruments with high liquidity are traded.
  • 5. What are financial instruments?A financial instrument is a tradable asset of anykind, either cash; evidence of an ownershipinterest in an entity; or a contractual right toreceive, or deliver, cash or another financialinstrument.Enable channelizing funds from surplus todeficit units.
  • 6. Money MarketOrganized Unorganized sector sector
  • 7. Organized sector Commercial paper Treasury bill Repo Call money Certificate of deposits Commercial bill
  • 8. Commercial paperCommercial Paper (CP) is an unsecured money marketinstrument issued in the form of a promissory note.Introduced in January 1990 by the R.B.I.It is issued by large banks and corporations to getmoney to meet short term obligations.It has fixed maturity of 1 to 270 days.
  • 9. Treasury bill marketThe R.B.I. issues the treasury bills on behalf of thegovernment to meet its deficits etc.The commercial banks can invest there SLR’s with thegovernment in the form of these treasury bills.Treasury bills, commonly referred to as T-Bills areissued by Government of India against their short termborrowing requirements with maturities rangingbetween 14 to 364 days.
  • 10. Market RepoA security is sold with an agreement torepurchase it at a pre-determined date andrate.It was introduced in December 1992.The difference between the original sale priceof the security and repurchase sale pricerepresents interest, which is known as repo rate.
  • 11. CALL MONEY MARKETMoney lent for one day is called ‘call money’; if it exceeds 1day but is less than 15 days it is called ‘notice money’.Money lent for more than 15 days is ‘term money’The borrowing is exclusively limited to banks, who aretemporarily short of funds.The main function of the call money market is toredistribute the pool of day-to-day surplus funds of banksamong other banks in temporary deficit of funds.
  • 12. Certificate of depositsIntroduced in 1989 by R.B.IThe commercial bank issued CD’s to the depositor.They are issued at a discount rate freely determined bythe market/investors.CD’s are transferable freely after 15days from the dateof issue.
  • 13. Commercial billThe commercial bill is also known as bill of exchange ortrade bill it is bill drawn by the seller to the buyer.The bill period is 90 days, and interest charged is the rateof discount which is based on market demand and supply.During the fixed period bill can be discounted andrediscounted by the commercial bank , this makes the billas self liquidating short term fund.
  • 14. Unorganized sector Indigenous bankers Chit funds, Nidhis Money lenders
  • 15. Indigenous bankersVary in size from petty lenders to substantialshroffs.Act as money changers and finance internal tradethrough internal bills of exchange.Indigenous banking is usually family ownedbusiness employing own working capital.
  • 16. Chit funds & NidhisChit funds are very common means of groupactivities, where members contribute a fixedamount of money and the beneficiary will be on thebasis of previously criteria or bids etc.Nidhi are mutual benefit funds, member collecthuge amount of money and the same money isadvanced as loans to members and non members.
  • 17. Money lenders They give loan against crops, gold & other securities etc. They charge high rate of interest. They use any means to recover their loans. They give immediate loans and loans for any purpose.• Keep close social relations with their clients.