A market like this doesn’t exist in isolation. Increasing amounts of work are being done online in addition to the traditional phone job. A corporation can meet its immediate cash demands by trading on this online market in exchange for low-risk, liquid, and unprotected assets. When a company need operational capital, it virtually invariably approaches the banking sector. This article will go into features of Indian money market in detail and provide some examples for your convenience.
Short-term cash and liquid assets trade on the money market, a subset of the broader financial market. These financial instruments and assets often have a maturity of less than a year, making them extremely liquid. Commercial papers and Treasury notes are just two examples of the financial instruments that can bring and sold on the money market.
Top 10 – Key Features of Indian Money Market
The primary function of the money market is to facilitate the transfer of funds. When there is a discrepancy between incoming and outgoing cash flow, businesses and financial institutions can buy (or sell) in the money market to fill the gap. This article discusses in detail about features of Indian money market.
Multiple Interest Rates
There is a broad spectrum of interest rates available on the Indian money market. They vary depending on the bank, the time period, and the individual customer. In structured markets, the interest rate is different than in unstructured ones. This causes interest rates to fluctuate widely in the Indian money market. Unrealized potential in the commercial banking sector.
The most prevalent source for such loans is a commercial bank. On the other hand, many successful banks and bankers have their origins in India. There is no requirement that they adhere to RBI regulations. This demonstrates that the financial market is not well-structured and does not interact with other markets.
You can purchase and sell funds for relatively short-term transactions on the call money market. You’ll have to pay the going cost for phone calls right now. Most call money is provided by commercial financial institutions. Institutions including scheduled commercial banks, cooperative banks, and primary dealers face significant volatility in the call money market as a result of fluctuations in call rates. These liquidity concerns have kept the market extremely unstable.
Because of Geography
Unlike stock exchanges, money markets are less restricted in terms of physical location. It’s possible that there’s a network of banks operating in various parts of the world that handle monetary assets. While cities like Mumbai, Calcutta, and Chennai all have their own money markets, these markets are actually interconnected. They depend on and are part of each other instead.
Numerous Banks Available
The Indian economy is served by a wide variety of banking options. Non-banking financial institutions, export-import banks, and cooperative banks are all examples. Numerous sectors can rely on them to provide the necessary funding.
Government Securities Inter-play
The Indian money market revolves around the inter-bank call money market. This is the fastest-moving sector in the money market. Most of the assets in the Indian money market hold in government and semi-government stocks.
Central bank Presence
The Reserve Bank of India has been given extensive authority over the various financial institutions in India. However, the RBI has failed to exert direct authority over the country’s banking sector.
This is why disorganized businesses charge significantly higher interest rates on loans than their organized counterparts. The country’s money supply is managed by the Central Bank to ensure it can cover commercial transactions. When other partner banks need money, they can turn to The Central Bank.
That’s why it’s so important to have a robust Central Bank that can direct, steer, and keep tabs on the currency…Provide more detail about…br />Due to the immaturity of the bill market: The Indian money market lacks anything resembling a centralized bill market. There is currently no bill market in India, despite the RBI’s best efforts to establish one with the Bill Market Scheme in 1952 and the New Bill Market Scheme in 1970.
The Indian financial market divide into regulated and uncontrolled sectors. They don’t share an office or have regular contact with one another. This explains why interest rates offered by various markets vary so widely.
Lack of Acceptance
On the Indian currency exchange market, you won’t find any acceptance and discount outlets. This is due to the fact that unlike other markets, the Indian bill industry is still developing. The Indian financial system isolates from global markets. Financial transactions between the Indian Money Market and other markets are minimal.
Changes with the Seasons
There are two main seasons of year when people are looking to get their hands on some cash: the busy season, and the slack season. From November through April, new harvests are brought to market, making those months very active. There is a critical need for funds at the present time. May through October is the shoulder season. The need for funds is significantly decreasing now that repayments have begun.
The Indian money market is a hybrid where trade can occur across regulated and unregulated sectors. The Reserve Bank of India (RBI), along with all scheduled commercial banks and a number of well-known financial companies, form the organized money market. Local money lenders, local bankers, sellers, and so on make up the unorganized side of the money market.
What’s Wrong with the Indian Money Market?
The interest rates available on the Indian money market are highly variable. Some examples of interest rates are those charged by the government to borrow money, by financial institutions to lend money, by cooperative and commercial banks to deposit and give away money, and so on. This is because transferring funds between different parts of the money market takes time.
Is there a Lot of Money on the Market in India?
The Indian money market is an integral aspect of the Indian economy. However, it is not nearly as sophisticated as the U.S. and British financial centers. Businesses with a valid RBI license can borrow and lend short-term funds to one another here.
Does RBI Take Part in the Market for Money?
The Reserve Bank of India (RBI) has also imposed caps on call-and-notice transactions in India’s money market. These guidelines were established to ensure that the entire monetary system can continue to function as intended and that the various components of the money market can expand in a balanced fashion.
The Discount and Finance House of India (DFHI) establish in April 1988 with the aim of bolstering the country’s money market. All Indian financial institutions (including the Reserve Bank of India, Public Sector Banks, and NABARD, EXIM Bank, etc.) possess shares in the company and have contributed to its paid-up capital. The Reserve Bank of India is the largest shareholder.
DFHI’s new role as a middleman in the money market has facilitated the investment of short-term surpluses by corporations, banks, and other financial institutions. To learn more, take a look at these features of indian money market. Read on for more information to help you comprehend the types of money market topic.