Economic IMM[1] Original

8/2/2019 Economic IMM[1] Original

1/24


2/24


3/24

As per RBI definitions A market for shortterms financial assets that are close substitutefor money, facilitates the exchange of money inprimary and secondary market.

The money market is a mechanism that dealswith the lending and borrowing of short termfunds (less than one year).

A segment of the financial market in whichfinancial instruments with high liquidity andvery short maturities are traded.


4/24

seventh largest and second most populouscountry in the world

private sector accounts for over 75%of its Gross

Domestic Product one of the most exciting emerging money

markets in the world.

The average turnover of the money market inIndia is over Rs. 40,000 crores daily


5/24

Till 1935 - RBI was set up, Indian money market wasvery backward.

1951 - economic development planned wascommenced

1969 - The nationalization of banks

1982 to 1988 - setting up of various committees

1991 - commencement of liberalization and

globalization process development of India moneymarket.

1994 - the securities trading corporation of India


6/24

Development of trade & industry.

Development of capital market.

Smooth functioning of commercial banks.

Effective central bank control.

Formulation of suitable monetary policy.

Non inflationary source of finance to

government.


7/24

Short-term funds

No fixed place for conduct of operations

Dealings may be conducted with or without

the help the brokers. short-term financial assets

Presence of a large number of submarkets


8/24

Dichotomy Structure- simaltaneous existance oforganised and unorganised money market.

Seasonality Demand for money is generatedfrom agricultural operations.

Multiplicity of Interest Rates In IMM we havemany levels of Intrest rates.

Lack of Organized Bill Market In IMM theorganised bill market is not prevalent.


9/24

Absence of Integration IMM is divided amongseveral segments or sections .

High Volatility in Call Money Market

the callmoney market is a market for very short termmoney.institutions such as LIC,GIC suffer hugefluctuations and thus it has high volatility

Limited Instruments :Supply of variousinstruments such as treasury bills, commercial billsis very limited.


10/24

Absence of Integration

Multiple rate of interest

Insufficient Funds or Resources

Shortage of Investment Instruments

Shortage of Commercial Bill

Lack of Organized Banking System

Less number of Dealers


11/24

Composition of Indian Money Market

OrganizedBanking Sector

RBI1) Com Banks

2) Co-op Banks

3) Foreign Banks4) Other Banks

UnorganizedBanking Sector

Money LendersIndigenous

Bankers

Sub Markets

Call Money

Bill Market

CommercialPapers

Certificates ofDeposits


12/24

1. Unorganized Sector

2. Organized Sector


13/24

1. Money Lender

2. Indigenous bankers

3. Non-banking Finance Corporations4. Intermediaries like Nidhis, finance

companies, etc


14/24

1 . Money Lenders

Professional, non-professional, gold smith

No acceptance of deposits

Their borrowers are poorfarm labour, small farmers,etc.

Intrest rate is high.

Operations are informal ,prompt and flexible.


15/24

Accept deposits, advance loans like banks

Money lenders dont accept deposits

Indigenous bankers are not regulated by RBI their rate of interest is high

Heterogenous groups - Gujrat Shroffs, Multani

Shroffs, Marwari Kayas, Chettiers


16/24

1. Loan from finance companies Spread over all parts of country

Give loans to retailers, wholesalers Charge high interest upto30-40%

Less formalities, hence quick operation than banks

2. Chit Funds

Chit funds are saving instruments Periodic subscriptions by members

Chit funds operate in all states

RBI has not control over them


17/24

Nidhis Like mutual benefit funds

Dealings combine to members

Source of fund deposits from members Loans are given to members at reasonable rates

More prevalent in south India


18/24

1. Call Money Market (CMM)- Fewhours to 14 days.

2. Treasury / Bill Market (TBM)- 14to 364 days

3. Commercial Bills Market (CBM)-upto 90 days


19/24

Certificate Deposit (CD) Market 3months to 1 year

Commercial Paper (CP) Market -Highly liquid and quite safe.

Repo and Reverse Repo 1 to 14 days


20/24

Deregulation of the Interest Rate

Money Market Mutual Fund (MMMFs)

Establishment of the DFI

Liquidity Adjustment Facility (LAF)

Electronic Transactions

Establishment of the CCIL

Development of New Market Instruments


21/24

Private sector banks to operate has providedmuch needed healthy competition in themoney markets.

Money market denotes inter-bank market Quantum of liquidity in the banking system

RBI intervences in the money market through a

host of interventions


22/24

India is an emerging economylargest democracy in the globe

GDP India is fourth highest in the world in PPP terms.


23/24

Indian GDP ranks to No.12 in nominal term ofworld GDP after US, Japan, UK, Germany,China, France, Italy, Spain, Canada, Brazil and

Russia. India is a large economy. It has GDP of $1100 B

(2007) or RS.55000 B.

Highest growth in stock market

Fifth highest foreign currency reserve in theworld
http://jyoti-kothari.hubpages.com/hub/Financial-problem-of-America--The-insider--Part-3http://jyoti-kothari.hubpages.com/hub/Is-the-UK---lap-dog-of-the-USAhttp://jyoti-kothari.hubpages.com/hub/China-chinese-economy-economics-politics-breakhttp://jyoti-kothari.hubpages.com/hub/India-diamonds-solitaireshttp://hubpages.com/author/JYOTI+KOTHARI/economy/besthttp://hubpages.com/author/JYOTI+KOTHARI/economy/besthttp://jyoti-kothari.hubpages.com/hub/India-diamonds-solitaireshttp://jyoti-kothari.hubpages.com/hub/China-chinese-economy-economics-politics-breakhttp://jyoti-kothari.hubpages.com/hub/Is-the-UK---lap-dog-of-the-USAhttp://jyoti-kothari.hubpages.com/hub/Financial-problem-of-America--The-insider--Part-3


24/24

Economic IMM[1] Original

Documents

Transcript of Economic IMM[1] Original