money market
Q 1: What is Money Market? What are the important functions performed by it?
Ans. A.MEANING OF MONEY MARKET:-
A money market is a market for borrowing and lending of short-term funds. It deals in funds and financial instruments having a maturity period of one day to one year. It is a mechanism through which short-term funds are loaned or borrowed and through which a large part of financial transactions of a particular country or of the world are cleared.
It is different from stock market. It is not a single market but a collection of markets for several instruments like call money market, Commercial bill market etc. The Reserve Bank of India is the most important constituent of Indian money market. Thus RBI describes money market as “the centre for dealings, mainly of a short-term character, in monetary assets, it meets the short-term requirements of borrowers and provides liquidity or cash to lenders”.
II. PLAYERS OF MONEY MARKET :-
In money market transactions of large amount and high volume take place. It is dominated by small number of large players. In money market the players are :-Government, RBI, DFHI (Discount and finance House of India) Banks, Mutual Funds, Corporate Investors, Provident Funds, PSUs (Public Sector Undertakings), NBFCs (Non-Banking Finance Companies) etc.The role andlevel of participation by each type of player differs from that of others.
III. FUNCTIONS OF MONEY MARKET :-
1) It caters to the short-term financial needs of the economy.
2) It helps the RBI in effective implementation of monetary policy.
3) It provides mechanism to achieve equilibrium between demand and supply of short-term funds.
4) It helps in allocation of short term funds through inter-bank transactions and money market Instruments.
5) It also provides funds in non-inflationary way to the government to meet its deficits.
6) It facilitates economic development.
Q.2: Explain the structure or components of Indian Money Market. OR
What are the
Ans. A.MEANING OF MONEY MARKET:-
A money market is a market for borrowing and lending of short-term funds. It deals in funds and financial instruments having a maturity period of one day to one year. It is a mechanism through which short-term funds are loaned or borrowed and through which a large part of financial transactions of a particular country or of the world are cleared.
It is different from stock market. It is not a single market but a collection of markets for several instruments like call money market, Commercial bill market etc. The Reserve Bank of India is the most important constituent of Indian money market. Thus RBI describes money market as “the centre for dealings, mainly of a short-term character, in monetary assets, it meets the short-term requirements of borrowers and provides liquidity or cash to lenders”.
II. PLAYERS OF MONEY MARKET :-
In money market transactions of large amount and high volume take place. It is dominated by small number of large players. In money market the players are :-Government, RBI, DFHI (Discount and finance House of India) Banks, Mutual Funds, Corporate Investors, Provident Funds, PSUs (Public Sector Undertakings), NBFCs (Non-Banking Finance Companies) etc.The role andlevel of participation by each type of player differs from that of others.
III. FUNCTIONS OF MONEY MARKET :-
1) It caters to the short-term financial needs of the economy.
2) It helps the RBI in effective implementation of monetary policy.
3) It provides mechanism to achieve equilibrium between demand and supply of short-term funds.
4) It helps in allocation of short term funds through inter-bank transactions and money market Instruments.
5) It also provides funds in non-inflationary way to the government to meet its deficits.
6) It facilitates economic development.
Q.2: Explain the structure or components of Indian Money Market. OR
What are the