092 money market by kanupriya
Transcript of 092 money market by kanupriya
MONEY MARKET
KANUPRIYAASSISTANT PROFESSOR COMMERCE DEPARTMENT
GCG-11,CHANDIGARH
CONTENTS
• INTRODUCTION
• CHARACTERISTICS OF MONEY MARKET
• SIGNIFICANCE OF MONEY MARKET
• STRUCTURE OF MONEY MARKET
• DEFECTS OF INDIAN MONEY MARKET
• SUGGESTIONS FOR IMPROVEMENTS
• SUMMARY
INTRODUCTION
FINANCIAL MARKETS
CAPITALMARKET
MONEYMARKET
Continued….
• The money market is a mechanism thatdeals with the lending and borrowing ofshort term funds (less than one year).
• A segment of the financial market inwhich financial instruments with highliquidity and very short maturities aretraded.
Continued…….
• It doesn’t actually deal in cash or moneybut deals with substitutes of cash liketrade bills, promissory notes & govtpapers which can be converted into cashwithout any loss at low transaction cost.
• It includes all individual, institution andintermediaries.
CHARACTERISTICS
• It is a market dealing with short term funds or financial assets.
• These financial assets have a maturity period of upto one year.
• Financial assets can be easily converted into cash.
• It consists of various sub markets like call money market, bill market etc.
• Central bank, commercial bank, financial institutions are main constituents of money market.
SIGNIFICANCE
• ECONOMIC DEVELOPMENT• PROFITABLE INVESTMENT• BORROWING BY GOVERNMENT• IMPORTANCE TO CENTRAL BANK• MOBILISATION OF FUNDS• HELPFUL IN SELF SUFFICIENCY OF
COMMERCIAL BANKS• SAVING AND INVESTMENT
STRUCTURE OF MONEY MARKET
MONEY MARKET
COMPONENTS INSTITUTIONS INSTRUMENTS
COMPONENTS
MONEY MARKET
CALL
MONEY MARKET
COLLATERALLOAN MARKET
ACCEPTANCEMARKET
BILL MARKET
CALL MONEY MARKET
• MARKET FOR VERY SHORT PERIOD
• MAINLY DEALS WITH ONE DAY LOANS
• LOAN PERIOD DOES NOT EXCEED SEVEN DAYS
• LOANS ARE GENERALLY MADE WITHOUT ANY COLLATERAL SECURITY
• LOW RATE OF INTEREST
• HIGH LIQUIDITY
COLLATERAL LOAN MARKET
• LOANS ARE GIVEN FOR FEW MONTHS.
• LOANS ARE BACKED BY SECURITIES.
• COLLATERAL MONEY IS RETURNED WHEN LOAN IS REPAID.
• LOANS ARE GENERALLY ADVANCED BY COMMERCIAL BANKS TO PRIVATE PARTIES IN THE MARKET.
ACCEPTANCE MARKET
• MARKET FOR BANKER’S ACCEPTANCES
• OLD FORM OF COMMERCIAL CREDIT
• DRAFTS DRAWN UPON A BANK ARE ACCEPTED AND ARE PAYABLE ON A SPECIFIED FUTURE DATE
BILL MARKET
• MARKET WHERE BILLS ARE BOUGHT AND SOLD
• DEALS IN SHORT TERM PAPERS LIKE BILLS OF EXCHANGE AND TREASURY BILLS
• BILLS OF EXCHANGE ARE COMMERCIAL PAPERS
• TREASURY BILLS ARE GOVERNMENT PAPER SECURITIES
INSTITUTIONS
• CENTRAL BANK
• COMMERCIAL BANKS
• INSURANCE COMPANIES
• ACCEPTANCE HOUSE
• BILL BROKERS
• BUSINESS CORPORATIONS
MONEY MARKET INSTRUMENTS
TREASURYBILLS
CERTIFICATEOF
DEPOSITS
CALL ANDSHORT NOTICE
MONEY
REPURCHASE AGREEMENTS
COMMERCIALPAPERS
COMMERCIALBILLS
INSTRUMENTS
DEFECTS OF INDIAN MONEY MARKET
EXISTENCE OF UNORGANISED SECTOR
LACK OF COORDINATION
LACK OF DEVELOPED BILL MARKET
SHORTAGE OF FUNDS
LACK OF UNIFORMITY IN INTEREST RATES
LACK OF WELL ORGANISEDBANKING SYSTEM
UNDERDEVELOPED BANKING HABITS
DEFECTS
OF
IMM
SUGGESTIONS FOR IMPROVEMENTS
CONTROL OVERINDIGENOUS
BANKING
REORGANISED CLEARINGHOUSES
DEVELOPMENT OF BILLMARKET
QUICKER REMITTANCE
FACILITY
MORE MARKET
PARTICIPANTS
ADVANCED INFORMATIONTECHNOLOGY
REDUCTION OFDISCOUNT RATES
ESTABLISHMENTOF ACCEPTANCE
HOUSE
REMOVAL OFVARIATIONS ININTEREST RATES
SUMMARY
• The money market specializes in debtsecurities that mature in less than one year.
• Money market securities are very liquid, andare considered very safe.
• With the globalisation of Indian economy,the Indian money market has to be geared upto become a significant instrument forgrowth .
• Central bank and government have to takefurther steps to improve the working ofmoney market.
THANK YOU