Pavitra Venkateswaran
Roll Number: 870
Semester VI
B.B.A; LL.B (Hons.)
Money Market in India


 The Money market in India is the money market for
short-term and long-term funds with maturity ...
Money market in India

 The Indian money market consists of diverse submarkets, each dealing in a particular type of sho...
Money market in China

An Overview
Overview

 China‟s money market lagged in its development
prior to the mid-1990s compared with the other
segments of the...
The total combined volume of transactions of these markets reached 5,864
billion Yuan by the end of 2000, growing by 73 pe...
Overview

 First, the interbank spot and repo trading
leapfrogged every year for those four years.
 The circulation of ...
Structure of the Money
Market



 There was a sharp drop in the proportion of
interbank lending and borrowing and the bi...
Structure of the Money
Market



 In 1985, the People‟s Bank of China officially allowed
lending and borrowing among spe...
Structure of the Money
Market



 A nationally unified interbank market was not officially
established until January 3, ...
Structure of the Money
Market



 China‟s bond market has been dominated by repo.
 The trading volume of repo has been ...
Structure of the Money
Market



 The commercial paper market in China dates back to the
beginning of the 1980s, when so...
Tentative Provisions

 The China Securities Regulatory Commission
(CSRC), and the People‟s Bank of China (PBOC)
jointly ...
Tentative Provisions

 As per the „TP‟, an MMF is a fund that only invests
in money market instruments. It is included i...
Tentative Provisions

 There is an emphasis on Safe and Standard Operation.
 There are strict limitations on the percen...
In 2013

 the Shanghai Interbank Offered Rate or Shibor
increased to 13.44 percent, exceeding even the highs
posted duri...
In 2013

 Over the recent period, some banks have been over
optimistic about their cash flows, and they didn't
consider ...
In 2013

 The financial markets have become more complex
and for a long time now the financial institutions
involved are...
In 2013

 Most of the newly issued loans have indeed just been
churned around. The increase in funds has all gone
to int...
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Money markets in china

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  • As the central bank was the main player, it is obvious that open market operations, the liberalized means of regulation, rose rapidly in its position in the arsenal of China’s monetary policy
  • Money markets in china

    1. 1. Pavitra Venkateswaran Roll Number: 870 Semester VI B.B.A; LL.B (Hons.)
    2. 2. Money Market in India   The Money market in India is the money market for short-term and long-term funds with maturity ranging from overnight to one year in India including financial instruments that are deemed to be close substitutes of money.  Similar to developed economies the Indian money market is diversified and has evolved through many stages, from the conventional platform of treasury bills and call money to commercial paper, certificates of deposit, repos, forward rate agreements and most recently interest rate swaps
    3. 3. Money market in India   The Indian money market consists of diverse submarkets, each dealing in a particular type of shortterm credit. The money market fulfills the borrowing and investment requirements of providers and users of short-term funds, and balances the demand for and supply of short-term funds by providing an equilibrium mechanism. It also serves as a focal point for the central bank's intervention in the market.
    4. 4. Money market in China  An Overview
    5. 5. Overview   China‟s money market lagged in its development prior to the mid-1990s compared with the other segments of the financial system, especially the stock market.  Drastic Changes towards the ends of the last century  The major money markets such as interbank lending and borrowing, spot and bond repo, commercial paper, and discount and rediscount, have developed by leaps and bounds since the beginning of 1997.
    6. 6. The total combined volume of transactions of these markets reached 5,864 billion Yuan by the end of 2000, growing by 73 percent in the short span of four years 
    7. 7. Overview   First, the interbank spot and repo trading leapfrogged every year for those four years.  The circulation of commercial paper and the scale of bill discount and rediscount were also expanded drastically in 2000  Against this background of growth, it is natural that the ratio of trading on the money market to GDP, an index for measuring the development of money market in an economy, rises rapidly
    8. 8. Structure of the Money Market   There was a sharp drop in the proportion of interbank lending and borrowing and the big rise in the trading of the bond market (especially repo) and trading of paper and discount.  In China‟s money market, the interbank market was the earliest to appear as a result of mainly nongovernmental forces.  As early as 1981, “underground” lending and borrowing for overcoming a lack of funds appeared in Jiangsu and Zhejiang, both of which boasted the most developed township and village enterprises
    9. 9. Structure of the Money Market   In 1985, the People‟s Bank of China officially allowed lending and borrowing among specialized banks as a major part of financial reform.  Lending and borrowing activities reached its peak in 1995, when the volume of trading reached 1,000 billion Yuan, doubling the amount of the previous year.  Such a situation on the interbank market, of course, aroused discontent from the monetary authorities and consequently led to three major overhauls of the market from the end of the 1980s
    10. 10. Structure of the Money Market   A nationally unified interbank market was not officially established until January 3, 1996, which was officially subject to tight regulation by the monetary authorities  it was from that time on, that the interbank market began to scale down and the size has not exceeded that of 1995 until today  On the other hand, the interbank bond market, especially the interbank treasury bond repo market, has developed rapidly, presenting a sharp contrast to the flagging interbank lending and borrowing market
    11. 11. Structure of the Money Market   China‟s bond market has been dominated by repo.  The trading volume of repo has been maintained at around 80 percent.  At the same time, China‟s bond market is relatively segmented. Up to the present, the national interbank bond market and the bond market of the Shenzhen and Shanghai stock exchanges are still operating side by side
    12. 12. Structure of the Money Market   The commercial paper market in China dates back to the beginning of the 1980s, when some economically developed areas began to explore the possibility of discount of commercial paper.  In 2000, the total trading volume of commercial paper, discount and rediscount topped 1,000 billion Yuan, accounting for 25 percent of the entire trading volume of the money market  while the total trading volume has been increasing, the proportion of discount and rediscount has gradually increased.  The commercial paper market has added such functions as providing loans (discount) as working capital and the basis for the open market operations rediscount by the central bank.
    13. 13. Tentative Provisions   The China Securities Regulatory Commission (CSRC), and the People‟s Bank of China (PBOC) jointly released the long awaited “Tentative Provisions” in 2004  It‟s the first legal recognition of the seven quasimoney market funds that currently operate in China‟s Capital markets  It also presents an outline for future legal framework for the Money Market Funds (MMFs)
    14. 14. Tentative Provisions   As per the „TP‟, an MMF is a fund that only invests in money market instruments. It is included in the category of securities investment funds and its legal framework falls within the framework of securities investment funds.  MMFs can invest in money market instruments including cash, bank term deposits or large-amount certificates of deposit, bonds, bond repurchases, central bank notes and other money market instruments with good liquidity that are permitted by the CSRC and the PBOC
    15. 15. Tentative Provisions   There is an emphasis on Safe and Standard Operation.  There are strict limitations on the percentage of various money market instruments invested by MMFs  Given the low risk in money market instruments, the interest rate fluctuations may be the only big threat.  MMF‟s transactions and settlement in the national interbank market shall comply with the PBOC‟s rules for interbank transactions and be supervised and examined periodically by the PBOC.
    16. 16. In 2013   the Shanghai Interbank Offered Rate or Shibor increased to 13.44 percent, exceeding even the highs posted during the financial crisis in 2008 and setting a new record high for the decade.  Since late May, China's interbank lending market began to show signs of tightness and the pressure has gradually been rising since then  By June 20, the tightening in the market reached a tipping point which traders have started referring to as the "June 20 massacre"
    17. 17. In 2013   Over the recent period, some banks have been over optimistic about their cash flows, and they didn't consider a series of facts that would affect the liquidity of the market in June. Therefore, without effective responses, and lack of the help from primary dealers like large banks, the price of funds in the money market fluctuated widely.  Overnight and 7-day lending rates reached 10-year highs, surpassing the levels registered during the height of the financial crisis in 2008.
    18. 18. In 2013   The financial markets have become more complex and for a long time now the financial institutions involved are not restricted to a few state-owned banks. The Central Bank also doesn't have any experience in stabilizing the inter-bank market or in ensuring that banks meet their repayment obligations. It's never had to face this kind of challenge before.
    19. 19. In 2013   Most of the newly issued loans have indeed just been churned around. The increase in funds has all gone to interbank lending, the banks are playing amongst themselves with money. This bout of tightness in the money markets and the Central Bank's decision not to release more funds is a warning to banks, that banks should direct funds into the real economy.  This echoes recent statements from China's State Council and the head of the CBRC on the need to ensure that funds are directed towards the real economy.

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