Marketing Knowledge:Indian Money Market for Upcoming Competitive Exams

Indian Money Market

The Indian money market concerns trading in money instruments involving borrowing and lending for short period. A well-organised money market is the basis of an effective monetary policy.

Classification:

The RBI occupies a pivotal position in the Indian money market as it controls the flow of currency and credit into the market. Structurally Indian money market is broadly classified into

1. Organised Sector
2. Unorganised Sectors
3. Sub-markets

(I) Organised Sector:

It comprises the RBI, which is the central bank and monetary authority in the country and public sector banks, private sector banks and foreign banks. It is called organised because its parts are systematically coordinated by the RBI. The three main components of the organised sector of the money markets are

1. Inter-Bank call money market
2. Bill Market 
3. Bank Loan market

Commercial banks dominated the Indian market system. They promote saving of the general public they offer safety and security for their savings and offer incentive in the form of interest on bank deposits. Apart from mobilising saving of the general public, the commercial banks create credit by simply promising to pay or meet the requirements of the borrowers.

(II) Unorganised Sector:

The unorganised sector is largely made up of indigenous bankers and money lenders in the country who pursue banking business on traditional lines and cater to the needs of a large number of people in the countryside. It is unorganised because its activities are not systematically coordinated by the RBI or any other authority.

(III) Sub-Markets:

Indian money market is composed of several sub-markets, each one of which deals in particular type of short-term credit. The call money market is the market for extremely short period loans, sometimes a day or for a few days. In the short-term bill market or discount market, short term bills normally upto 90 days are bought and sold. The other important markets are these for 182 treasury bill, certificates of deposits and commercial paper.

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