February 22, 2019

Money Market

Definition and structure of money market- 

Money Market: Money market is the market where short term funds are borrowed and lend, this short term stands for one-day up to 364-day.  Money market is regulated by Reserve Bank of India.                                                                                          
Structure of money market- Money market are mainly two types (I) organized and (II) unorganized         organized money market follows rules and regulations while unorganized does not follows rules and regulations of reserve bank of India. Example of 

Organized money markets- Banks, Non-banking financial companies (NBFCs), Submoney market Submoney market examples: Call money, Commercial paper, Treasury bills, Certificate of depost. 

Unorganized money market: indegenious lenders, NBFCs.   NBFCs: non banking financial companies registered under companies act 1956. NBFCs do not accept demand deposit they accept only term deposit. NBFCs don't maintain cash reserve ratio they maintain statuary liquidity ratio.          

 What is call money market? call money market is the market for very short term lending and borrowing . this short term stands for  generally one-day.  1 day - call money, 2 up to 14 days- Notice money, 15 up to 364 days- Term money . It is completely interbank market both borrows and lender are required to have current account with reserve bank of India interest rate charges in this market known as interbank offer rate.           
  Money market instruments: this instruments provide the tools by which  one can operate in the money market.  Example- Treasury bills, Commercial paper, Certificate of deposit, repurchase agreement and banker's acceptance.

 Banker's Acceptance: it is like a short term investment plan initiated by non financial company or firm, backed by a guarantee from the banks. It is like bill of exchange stating about buyer's promise to pay to the seller a certain specified amount at a certain date and the bank guarantees that the buyer will pay the seller at a future date.   These securities comes with maturities between 30 and 180 days most commonly 90 days.                                       

No comments:

Post a Comment

Bank Po/Clerk Practice Link OR Resources ( Top resources)

(1) TestZone(SmartKeeda.com) , www. AspirantsZone . (2)Www. AffairscloudZone .  (3)www. bankersaddazone .  (4)www. testbookzone .  (5)www. ...