This document provides an overview of the money market in India. It defines the money market as a market for short-term financial assets that act as close substitutes for money. The money market consists of various sub-markets including the call money market, commercial bill market, acceptance market, and treasury bill market. These sub-markets facilitate short-term lending and borrowing of up to one year. The document also outlines the key features and constituents of the money market as well as the role of the Reserve Bank of India in regulating this market.

1. Submitted By
Aiswarya V V
4th sem Mcom
DCMS
Seminar presentation on Moneymarket

2. CONTENTS
What is Money Market?
Features of Money Markets.
Constituents of Money Markets.
Role of RBI

3. What is Money Market?
FINANCIAL
MARKETS
MONEY
MARKET
CAPITAL
MARKET

4. Money Market
 As per RBI definitions “ A market for short terms
financial assets that are close substitute for money,
facilitates the exchange of money in primary and
secondary market”.
 The money market is a mechanism that deals with
the lending and borrowing of short term funds
(less than one year).
 A segment of the financial market in which
financial instruments with high liquidity and very
short maturities are traded.

5. Continued…..
 It doesn’t actually deal in cash or money but deals
with substitute of cash like trade bills, promissory
notes & government papers which can converted
into cash without any loss at low transaction cost.
 It includes all individual, institution and
intermediaries.

6. Features of Money Market
 It is a market purely for short term funds/financial
assets.
 It deals with financial assets having a maturity period
up to 1 year only.
 Transactions have to be conducted without the help of
brokers.
 It is not a single homogeneous market, it comprises of
several submarket like call money market, acceptance
& bill market.
 It deals only high liquid financial assets.
 In Money Market transaction can not take place
formal like stock exchange, only through oral
communication, relevant document and written
communication transaction can be done.

7. Composition of Money Market
Money Market consists of a number of sub-markets
which collectively constitute the money market.
They are,
 Call Money Market
 Commercial bills market or discount market
 Acceptance market
 Treasury bill market

8. 1. Call Money Market
 Call money market refers to the market for extremely short
period loans, say one day to 14 days.
 The loans are repayable on demand.
Advantages:
•High liquidity
•High profitability
•Maintenance of SLR
•Safe & cheap
•Assistance to Central
bank operations
Disadvantages:
•Uneven development
•Lack of integration
•Volatility in Call
Money rates

9. 2.Commercial Bill Market/ Discount Market
 A commercial bill is one which arises out of a credit
transactions.
 A bill of exchange is a ‘self liquidating ’ paper &
negotiable.
 It is drawn always for short period ranging between 3
months and 6 months.
 Sec 5 of the Negotiable instruments Act defines a bill
of exchange as follows:

10. “An instrument in writing containing an
unconditional order, signed by the maker,
directing a certain person to pay a certain sum of
money only to, or to the order of a certain person
or to the bearer of the instrument.”
Discount Market: Discount markets refers to the
market where short term genuine trade bills are
discounted by financial intermediaries like
commercial banks.

11. 3.Acceptance Market
Acceptance market refers to the market where short
term genuine trade bills are accepted by financial
intermediaries.
Advantages:
•Liquidity
•Self liquidating and
negotiable assets
•Ideal investment
•Simple legal remedy
•High and quick yield
•Easy Central bank control
Disadvantages
•Absence of bill culture
•Absence of rediscounting
among bank
•Stamp duty
•Absence of secondary
market
•Difficulty in ascertaining
genuine trade bills.
•Limited foreign trade
•Absence of acceptance
services.

12. Treasury Bill Market
 Treasury bills represent short term borrowings of the
Government.
 It refers to the market where treasury bills are bought
& sold.
 It is a promissory note issued by the Gov’t under
discount for a specified period stated therein.
 The period does not exceed a period of 1 year.
 It is issued by RBI on behalf of the Gov’t.

13. Advantages:
Safety
Liquidity
Ideal short term investment
Ideal fund management
Statutory liquidity requirement
Source of short term funds
Non inflationary monetary tool
Hedging facility
Disadvantages:
Poor yield
Absence of competitive bids
Absence of active trading

14. Role of RBI

15. References
Gordon & Natarajan “Financial Markets and
Services”, Himalaya Publishing House, Pg no:29-
48.