INDIAN MONEY MARKET AND ITS

FEATURES Submitted

by S.Hemalatha

INDIAN MONEY MARKETAccording to geottery crowther, “The money market is the collective name given to the various firm and insitutions that deals in the various grade of near money.

FEATURES OF INDIAN MONEY MARKET

EXISTENCE OF UNORGANISED SECTOR: The Indian money market consist of organised

and unorganised sector. The organised sector consist of RBI, private

bank, public bank, unit trust of India etc. The unorganised sector comprises of indigenous

bankers. The indigenous banks follow their own rules of

banking and finance.Many attempt were made by RBI to bring the indigenous bankers under their control.

ABSENCE OF INTEGRATION The Indian money market was divided

into several section with each section being loosely connected with other section.

The organised and unorganised banking system did not have any contact between them remaining completely aloof from each other.

DIVERSITY IN MONE RATE OF INTEREST

There exit wide diversity in the money rates of interest in the money market.

The different rates of interest get adjusted to the changes in the bank rate.

The money rates of interest also differ between different regions or centers.

This leads to fluctuactions in security prices.

SEASONAL STRINGENCY OF FUNDS The demand for money in Indian money

market is of seasonal in nature. During the busy season from October to April, money is needed for financing the marketing of agricultural products. So there is more demand for money. From the end of April, the demand for more begins to decrease till the end of October.

ABSENCE OF BILL MARKET The bill market in Indian money market

is of infancy. The market for government and semi-government securities is narrow.

The market for bill of exchange and treasury bills is little developed. The Reserve Bank of India has taken steps to develop genuine bill market in India.

NO CONTACT WITH FOREIGN MONEY MARKET

The Indian money market is an insular one with little contact with money market in other countries. There is large movement of capital between money market so there do not attract any foreign funds as developed money markets.

LIMITED INSTRUMENTS The supply of money market

instruments like bills, treasury bill etc. is very limited and inadequate considering the varied requirements of short term funds. In developed money market, there should be well diversified mix of money market instruments so as to meet the varied requirement of borrowers and lenders.

LIMTED SECONDARY MARKET The secondary market is very limited in

the case of money market instruments. In India, People generally prefer cash credit and O.D to bill financing. Hence Primary market is also limited.

LIMITED PARTICIPANTS The participants in the Indian money

market are also limited. Entering in the market is strictly regulated.

There are large number of borrowers but few lenders. Hence the market is not very active, broad and vibrant.

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