The Indian money market can be divided into two parts: (A) Organized money market (B) Unorganized money market.
(A) Organized Money Market: Being a formal money market, it is owned by the Reserve Bank of India, commercial banks, mutual funds etc. The organized money market in India is controlled by the Reserve Bank of India.
In order to maintain sufficient liquidity in the money market, the Reserve Bank of India changes the interest rate as per the need. Organized money market includes financial instruments like treasury bill, certificate of deposit, call money. The syndicated money market is systematically coordinated and regulated by the Reserve Bank of India.
(B) Unorganized Money Market: Since the unorganized money market is informal, it is not controlled by any central organization. The activities also run without any rules. This money market consists of moneylenders, landlords, mortgagors, country bankers, Shroff etc. All this lacks coordination. Unorganized money market activities are more developed in rural areas of India, though are also found in urban areas.
- Instruments of Money Market: Money market instruments have a maturity of one year or less. Safe and Jinn Salaman, both A variety of instruments are traded in the money market. The main instruments of money market are : 1) Treasury mill, (2) Commercial paper, (3) Certificate of deposit, (4) Commercial mill (5) Kolkhotis masti.
- Treasury Bills: Treasury Bills are short-term financial instruments issued by the Reserve Bank of India on behalf of the Government of India. Treasury Bills are an important component of the global market. Borrow money.Treasury mill has zero liquidity since maturity date is 91 days or 364 days.Treasury bills are not paid in excess and at principal If a treasury mil of ₹ 25,000 is issued at ₹ 23,500 and the principal price of ₹ 25,000 is paid to the investor at maturity, the difference between the two is known as the return to the investor as the treasury mil T-BA.
- Commercial Paper (Commercial Papers): Since 1980, commercial papers have been banned. The Reserve Bank of India first issued Premsinchal paper in January, 1900. Commercial paper is a document like a safe and short-term promissory note. sion to obtain short-term funds. Corporate entities with high creditworthiness that have strong financial position are preferred. Harar is a reversible sion, therefore subject to replacement. Companies and financial institutions can impose a moratorium for a minimum period of seven days and a maximum period of one year. Commercial paper is controlled by the Reserve Bank of India. It is issued in denominations of ₹ 5 lakh and above and is also known as finance wrapper, industrial paper and corporate paper.
- Certificate of Deposits : Certificate of Deposit is an unsecured, negotiable and short term instrument of finance. Schedules may be issued by commercial banks and financial institutions. A certificate of deposit is different from a Fixed Time Deposit Receipt deposited in a bank. Certificate of Deposit is transferable and salable; Whereas Fixed Term Deposit Receipts are non-transferable and cannot be sold. Schedule merchant banks are free to issue as per their requirement subject to certain conditions. The value of the certificate of deposit should be at least ₹ 1 lakh.
- Commercial Bills: When goods are purchased on credit, the merchant who sells the goods writes a commercial bill on the buyer of the goods on credit. Commercial bills are negotiable and arise out of business transactions. There is an unconditional order to pay a certain amount in full. There are many types of commercial bills. Like, bill of exchange, dowry, inland bill, demand bill, foreign bill etc. When the seller writes on the buyer, this bill becomes a ‘Trade Bill’ and when the merchant bank accepts this bill, this bill becomes a ‘Commercial Bill’. A merchant bank passes this bill in excess. If the bank needs money, it can re-extend to the financial institutions. Commercial bills are usually for 30, 60 or 90 days.
- Call and Notice Money: Commercial banks have to maintain a minimum cash balance, called cash reserve, as per Reserve Bank regulations. A bank borrows money from another bank to maintain a minimum cash balance. All banks have to maintain a cash reserve ratio. For this reason the call money market has become an important component of the money market. The call money market consists of call money and notice money. No conclusion is to be given for call money and notice money.
- Call Money: When money is lent or borrowed for a single day, it is called call money. Call Money is a same day transaction. Since mostly banks participate in the call money market, it is called ‘Inter-Bank-Call Money Market’. According to Reserve Bank rules, all commercial banks have to maintain a cash reserve ratio. Hence a bank that is short of cash borrows money from another bank that has excess cash. One in short day loan means call money.
