You have various options when it comes to selling your firm. This type of market includes the financial market, which is where money purchase and traded. There are two major elements to the banking sector: the money market and the capital market. Let us continue to learn so that we can gain a better understanding of the money markets. We’ll look at the features of indian money market and talk about the related topics in this area.
The market in question lacks a proper website. Consequently, most transactions occur over the phone or, more recently, online. This internet marketplace enables anyone to buy and sell low-risk, liquid, and unsecured goods. Its aim is to aid businesses with their short-term financial needs, as they often acquire working capital from this financial market.
Features of Indian Money Market
For lack of a better phrase, the money market facilitates the lending and borrowing of money for short periods of time. On the plus side, the money market allows banks to move significant amounts of money to one another. On the other hand, it allows institutions with excess capital to lend it to banks and enterprises who require short-term money in exchange for a charge. The features of indian money market include:
Seasonal Variations
There are two times when people require cash: the busy season and the down season. From November to April, when many various agricultural items are offered at higher rates, this is known as the “busy season.” There is a severe shortage of available cash right now. The offseason runs from May to October. When the loans repay, their market value plummets significantly.
Dichotomic Structure
There are two distinct but related sorts of structures in the Indian money market at the same time. These are the orderly and disorganized. The Reserve Bank of India (RBI), all scheduled private banks, and other well-known financial institutions comprise the organized money market. The unorganize money market, on the other hand, is made up of local moneylenders, indigenous bankers, sellers, and other companies.
High Volatility
On the call money market, people buy and sell funds with dates that are somewhat near to the present. The call rate is the real-time exchange rate for requests for funds. In the most fundamental sense, commercial banks are the primary sources of call money borrowing. Due to unequal liquidity, scheduled commercial banks, primary dealers, and co-operative banks are particularly vulnerable to the ups and downs of the call money market. Because of these changes, which are caused by variations in call rates, the market has remained extremely volatile.
Multiplicity of Interest Rates
The Indian money market offers a wide range of interest rates, which can vary depending on the customer, the bank, and the time period. It’s important to note that the interest rates for structured and uncontrolled components differ. This implies that in the Indian money market, customers have the option to choose from a variety of interest rates. Additionally, there’s a less developed commercial banking system in place.
The majority of money that can use in the near future originates from commercial banks. However, India has a large number of its own bankers and financial institutions, each of which operates in its own unique fashion. They are not subject to the RBI’s jurisdiction. One probable outcome is that the money market not well-organize or link.
Presence of Central Bank
It has extensive control over various money market financial firms because the Reserve Bank of India granted it that authority. Nonetheless, the Indian banking industry has persisted without direct regulation from the RBI. As a result, the unregulated sector has significantly higher interest rates than the organized sector. The Central Bank regulates the amount of money in the country depending on economic needs. In times of hardship, other member banks can borrow money from the Central Bank. In other words, a strong central bank regulates, guides, and administers money. Show more content…In general, the Indian money market is not well-organized in terms of banknotes. Currently, there is no framework in the bill market. Despite the RBI’s best efforts to launch the Bill Market Scheme in 1952 and the New Bill Market Scheme in 1970, India now lacks an organized bill market.
Absence of Acceptance and Isolation from Foreign
In India’s money market, there are few acceptance and discount houses. There is an obvious shortage of this. This is because India’s bill market is still in its early stages. There is no relationship between the Indian money market and any other market in the globe. The Indian Money Market is not a good destination for foreign currency.
Variety of Financial Institutions
India’s extensive financial system includes many cooperative banks, export-import banks, and non-banking financial institutions. This is what the Indian market known for. They can support a wide range of enterprises with their financial demands.
Inter-call Money Market and Government Securities
The interbank call money market is the epicenter of the Indian money market. This segment of the money market the most likely to decline. The Indian money market primarily make up of government and semi-government assets.
Dichotomy
India’s money market divide into two major categories: organized and chaotic. There isn’t much communication or collaboration amongst them. This explains why the interest rates in the two markets are so different.
Geographical Constraints
The money market, unlike stock platforms, is not limited by its location. Banks and other financial institutions can find all over the world. Many money markets exist in India, including those in Mumbai, Calcutta, Chennai, and other places. These markets are not distinct from one another; rather, they are intricate webs of interaction.
FAQ
Is the Money Market in India Well Developed?
One of India’s most significant economic achievements has been the expansion of its money market. However, it has not been as long-standing as the US and London money markets. The Reserve Bank of India has allowed people in this market to offer and borrow short-term currency.
Does Rbi Participate in Money Market?
The Reserve Bank of India (RBI) has also imposed rigorous guidelines for how banks can borrow and lend money in the call/notice money market. These guidelines intend to keep the economy stable and promote equitable growth throughout the various segments of the money market.
What are the Important Segments of Indian Money Market?
India’s money market includes Treasury Bills, short-term money, and call money. These are the most valuable assets. These segments are dominated by the money market’s most powerful players, primarily traders (PDs) and financial institutions (FIs).
Final Remarks
Some of the actions made included removing interest rate caps on the money market, auctioning off Treasury bills, and tightening prudential controls. To pique even more people’s interest, the maturities of other assets, such as Commercial Paper and Certificates of Deposit, were gradually reduced. I appreciate you reading the features of indian money market guide. Visit the website to learn more and expand your knowledge with other helpful resources. Read more about the role of central bank in money market to learn more about it.
