Money Market, It's Types and Features

Money Market:-

Money market is a short-term funds market and it deals in financial assets whose maturity period is upto 1 year. Money market is not deal in money or cash as such but simply provides a market for credit instrument such as promissory notes, bill of exchange, commercial paper, treasury bills, etc. These financial instruments are close substitute of money.

Indian money market consist of Reserve Bank of India, Commercial Bank, Co-operative Bank and other specialised Financial Institutions. The leader of money market in India is Reserve Bank of India.(RBI). Indian money market also operate some Non-Banking Financial Companies (NBFCs) and Financial Institutions like LIC, GIC, UTI, etc.


Types of Money Market:-

1- Treasury Bills (T-Bills)

2- Certificates of Deposits (CDs) 

3- Commercial Papers

4- Banker's Acceptance

5- Repurchase Agreements


1- Treasury Bills (T-Bills):-

Treasury bills are issued by Reserve Bank of India on behalf of Central Government for raising money.

2- Certificates of Deposits (CD):-

Certificate of deposits are financial assets that are issued by Banks and Financial Institutions.

3- Commercial Papers:-

Large companies and business issues promissory notes to raise capital to meet short term business needs, known as commercial paper.

4- Banker's Acceptance:-

A Financial instrument produced by an individual or a Corporation, in the name of the bank is known as Bankers Acceptance.

5- Repurchase Agreements:-

Repurchase agreements are a formal agreement between two parties, where one party sells a security to another, with the promise of buying it back at a later date from the buyer. It also include interest rate at which the buyer agreed to buy the security.


Function of  Money Market:-

1- Provides Fund

2- Use of Surplus Fund

3- Helps Government

4- No need to Barrow from Bank

5- Helps in Financial Mobility

6- Helps in Monetary Policy

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