The money market deals with short-term lending and borrowing of less than one year. It facilitates the exchange of funds and assists with economic development by providing financing. Money market instruments include government securities, call money, treasury bills, certificates of deposits, commercial bills, commercial paper, and repurchase agreements. The money market is important for trade, industry, banks, monetary policy, and government financing. However, it also has disadvantages like inflation risk, lack of integration, and limited instruments and participants.

1. MONEY MARKET
FUNCTION ORGANIZATION
AND INSTRUMENTS
PRESENTED BY
SUMAN SAHA
STUDENT OF BBA
BRAINWARE UNIVERSITY
SUPERVISOR
DR. MUKUND MISHRA

2. 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.
According to the Geoffrey, “money market is the collective name
given to the various firms and institutions that deal in the various
grades of the near money.”

3. Functions of Money market
Economic development – Money market assures supply of funds;
financing is done through discounting of the trade bills, commercial
banks, acceptance houses and brokers.
Profitable Investment – the excess reserves of commercial banks
invested in near money assets.
Borrowings by the Government – short term funds at very low
interest.
Importance For Central Bank – If the money market is well developed,
the central bank implements the monetary policy successfully.
Mobilization of Funds – helps in transferring funds from one sector to
another.
Savings And Investment – encouraging savings and investment by
promoting liquidity and safety of financial assets.
Self-sufficiency Of Commercial Banks – commercial banks can meet
their financial requirements by recalling some of their loans.

4. Money market Instruments
Investment in money market is done through
money market instruments.
Money market instrument meets short term
requirements of the borrowers and provides liquidity
to the lenders
The most active part of the money market is the
market for overnight call and term money between
banks and institutions and repotransactions

5. 1.GOVERNMENT SECURITIES (G- Secs)
Issued by the Government for raising a public
loan or as notified in the official Gazette.
Maturity ranges from of 2-30 years.
G-secs consist of Government Promissory Notes,
Bearer Bonds, Stocks or Bonds, Treasury Bills or
Dated Government Securities.
No default risk as the securities carry sovereign
guarantee.
Ample liquidity as the investor can sell the
security in the secondary market.

6. 2. MONEY MARKET AT CALL AND
SHORT NOTICE
Money at call is a loan that is repayable on
demand, and money at short notice is repayable
within 14 days of serving a notice.
Participants are banks & all other Indian
Financial Institutions as permitted by RBI.
Banks borrow call funds for a variety of reasons
to maintain their CRR, to meet their heavy
payments, to adjust their maturity mismatch etc.

7. 3. TREASURY BILL
Short term (up to one year) borrowing instruments
of the Government of India.
Enable investors to park their short-term surplus
funds while reducing their market risk.
Issued at a discount to face value. The return to
the investor is the difference between the maturity
value and issue price.
RBI issues T-Bills for three different maturities: 91
days, 182 days and 364 days

8. 4. CERTIFICATES OF DEPOSITS
A CD is a time deposit, financial product
commonly offered to consumers by banks.
CDs are negotiable instrument.
Financial Institutions are allowed to issue
CDs for a period between 1 year and up to 3
years.
normally give a higher return than Bank
term deposit, and are rated by approved rating
agencies.

9. 5. COMMERCIAL BILLS
Commercial bill is a short term, negotiable, and
self-liquidating instrument with low risk.
Written instrument containing an unconditional
order.
Once the buyer signifies his acceptance on the bill
itself it becomes a legal document.
Commercial bill is a short term, negotiable, and
self-liquidating instrument with low risk.

10. 6. COMMERCIAL PAPER
Commercial Paper is a money-market security
issued (sold) by large banks and corporations to
get money to meet short term debt obligations .
Commercial paper is usually sold at a discount
from face value.
Interest rates fluctuate with market conditions
but are typically lower than banks‘ rates.

11. 7. REPURCHASE AGREEMENTS
Repo or Reverse Repo are transactions or short-
term loans in which two parties agree to sell and
repurchase the same security.
They are usually used for overnight borrowing
Repo/Reverse Repo transactions can be done
only between the parties approved by RBI and in
RBI approved securities

12. IMPORTANCE OF MONEY MARKET
o Development of trade & industry.
o Development of capital market.
o Smooth functioning of commercial banks.
o Effective central bank control.
o Formulation of suitable monetary policy.
o source of finance to government.

13. DISADVANTAGE OF MONEY MARKET
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.