Money Market
Q 1: What is Money Market? What are
the important functions performed by it?
Ans. A.MEANING OF MONEY MARKET:-
A money market is a
market for borrowing and lending of short-term funds. It deals in funds and
financial instruments having a maturity period of one day to one year. It is a
mechanism through which short-term funds are loaned or borrowed and through
which a large part of financial transactions of a particular country or of the
world are cleared.
It is different from stock market. It is not a single
market but a collection of markets for several instruments like call money
market, Commercial bill market etc. The Reserve Bank of India is the most
important constituent of Indian money market. Thus RBI describes money market
as “the centre for dealings, mainly of a short-term character, in monetary
assets, it meets the short-term requirements of borrowers and provides
liquidity or cash to lenders”.
II. PLAYERS OF MONEY MARKET :-
In money market transactions of large amount and high
volume take place. It is dominated by small number of large players. In money
market the players are :-Government, RBI, DFHI (Discount and finance House of
India) Banks, Mutual Funds, Corporate Investors, Provident Funds, PSUs (Public
Sector Undertakings), NBFCs (Non-Banking Finance Companies) etc.
The role and level of participation by each type of
player differs from that of others.
