The document defines the money market as a market for short-term financial assets that are close substitutes for money and facilitate exchanges in primary and secondary markets. It discusses various money market instruments like treasury bills, commercial papers, certificates of deposit, and repurchase agreements that have maturities of one year or less. The document also outlines the structure of the organized Indian money market including key participants like the Reserve Bank of India, commercial banks, and development banks. It notes some purposes of the money market like providing parking for short-term funds and enabling central bank intervention.

2.  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“.

3.  Market for short-term financial
instruments
 Maturities of one year or less, and
often 30 days or less

4.  Trading takes place in large
financial centres
 Companies and investors often
use money market securities

5.  Money market instruments have
low risk
 Core of the money market
consists of interbank lending

6.  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

7.  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.

8.  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

9.  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

10.  Treasury Bills (T-Bills)
 Repurchase Agreements
 Commercial Papers
 Certificate of Deposit
 Banker's Acceptance
 Call money market
 Money Market Mutual Funds

11.  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

12.  Repurchase Agreements –
 Also known as repos
 Repo transactions are allowed only between
RBI-approved securities
 Repurchase agreements are sold by sellers
with a promise

13.  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

14.  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

15.  Banker's 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

16.  Call money market –
 Maturity period varying from one day to 15 days
 Interest rate paid on call money loans is called
Call Rate

17. 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

18.  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

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