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MONEY MARKET

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INTRODUCTION

Money Market is a market where borrowers and lenders exchange short – term funds to fulfill their liquidity needs. This market is a very important segment of Indian Financial System. 

In other words, this market operates as a wholesale market for low risk, highly liquid, short term instruments such as the call market, the bill market, the Treasury bill market, commercial paper market and certificate of deposit market. Government of India is an active player in the money market and also the biggest borrower. It is a formal financial market that deals with short term fund management.  

Moreover, the banking industry also plays an important part in the money market. The instruments of this market are Govt. Securities, Treasury Bills issued by the Reserve Bank of India (RBI) for and on behalf of the Govt. of India to meet the liquidity requirement of Govt. of India. 

Money market is for a maximum tenor of 1 year, depending upon the tenors, the money market is classified into: 

(a) Overnight Market: The tenor of transactions is one working day.

(b) Notice money market: The tenor of the transactions is from 2 days to 14 days.

(c) Term Money Market: The tenor of the transactions is from 15 days to one year.

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