2. •Money market basically refers to a section of the
financial market where financial instruments with high
liquidity and short-term maturities are traded.
•Money market has become a component of
the financial market for buying and selling of securities
of short-term maturities, of one year or less, such as
treasury bills and commercial papers.
DEFINITION
3. • Money market consists of negotiable
instruments such as treasury bills, commercial
papers. And certificates of deposit. It is used by
many participants, including companies, to
raise funds by selling commercial papers in
the market. Money market is considered a safe
place to invest due to the high liquidity of
securities.
4. • Money market consists of negotiable instruments
such as treasury bills, commercial papers. And
certificates of deposit. It is used by many
participants, including companies, to raise funds
by selling commercial papers in the market.
Money market is considered a safe place to invest
due to the high liquidity of securities.
5. IMPORTANCE OF MONEY MARKET
Financing
Trade
Financing
Industry
Profitable
Investment
Self
sufficient
banks
7. 1) Call And Notice Money Market :-
• The market for extremely short-period is referred as call money
market. Under call money market, funds are transacted on
overnight basis. The participants are mostly banks. Therefore it is
also called Inter-Bank Money Market. Under notice money market
funds are transacted for 2 days and 14 days period. The lender
issues a notice to the borrower 2 to 3 days before the funds are to
be paid. On receipt of notice, borrower have to repay the funds. In
this market the rate at which funds are borrowed and lent is called
the call money rate.
8. 2) COMMERCIAL PAPER
• Commercial Papers were introduced in January 1990.
The Commercial Papers can be issued by listed
company which have working capital of not less than
Rs. 5 crores. They could be issued in multiple of Rs. 25
akhs. The minimum size o1 issue being Rs. 1 crore. At
present the maturity period of CPs ranges between 7
days to 1 year. CDs are issued at a discount to its face
value and redeemed at its face value.
9. 3) TREASURY BILLS (t-bills)
• Commercial bill can be resold a number of times during
the usance period of bill.
• Treasury bills are available for a minimum amount of Rs.
25,000 and in multiples of Rs. 25,000. Periodic auctions
are held for their Issue.
• At present three types of treasury bills are issued
through auctions, namely 91 day, 182 day and364day
treasury bills.
• Interest is determined by market forces.
10. 4) COMMERCIAL BILLS
• A bill of exchange is drawn by a seller on the buyer to
make payment within a certain period of time.
Generally, the maturity period is of three months.
Commercial bill can be resold a number of times during
the usance period of bill.
• Commercial bills are short term, negotiable and self
liquidating money market instruments with low risk.
• Commercial bill can be resold a number of times during
the usance period of bill.
11. 5) CERTIFICATE OF DEPOSITES (CD)
• The scheme of CDs was introduced in 1989 by RBI. The main
purpose was to enable the commercial banks to raise funds
from market.
• CDs are unsecured, negotiable promissory notes issued at a
discount to the face value.
• CDs are issued by Commercial banks and development financial
institutions.
• At present, the maturity period of CDs ranges from 3 months to
1 year. They are issued in multiples of Rs. 25 lakh subject to a
minimum size of Rs. 1 crore.
12. PLAYERS OF MONEY MARKET
Dealers
Corporate
firms
Financial
institution
Commercial
bank
Reserve
bank
of
India
Government
