Money Market Presentation 2003

8/8/2019 Money Market Presentation 2003

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PRESENTATION ON MONEY MARKET

PRESENTED TO: PROF. SADAF HASHMI PRESENTED BY:

GHAZALA SHAIKH

SHAHBAZ KHAN

SALMAN KASMANI

AMBRIN KHAN

AHMED ABBASI

SUHAIL DHANANI


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CONTENTS:

What is Money Market?

The Role of RBI in Money Market

Features of Money Market

Objectives of Money Market

Benefits and Functions of Money Market

History of Money Market

Scope of Indian Money Market

Composition of Money Market


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CONTINUED:

Instruments of Money Market

Structure of Indian Money Market (organized &

unorganized)

Advantages and Disadvantages of Money Market

Characteristics Features of a developed Money

Market

Recent Development in Money Market

Growth of Money Market In India

Summary/Conclusion


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WHAT IS MONEY MARKET?

As per RBI definitions A market for short terms

financial assets that are close substitute for

money, facilitates the exchange of money in

primary and secondary market.

The money market is a mechanism that deals

with the lending and borrowing of short term

funds (less than one year).

A segment of the financial market in which financial

instruments with high liquidity and very short

maturities are traded.


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CONTINUED..

It doesnt actually deal in cash or money but

deals with substitute of cash like trade bills,

promissory notes & government papers whichcan converted into cash without any loss at low

transaction cost.

It includes all individual, institution and

intermediaries.


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THE ROLE OF RBI IN MONEY MARKET

To ensure that liquidity and short terms interests are

maintain.

To ensure adequate flow of credit to the productive

sector of economy.

To bring about order in the foreign exchange market.


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FEATURES OF MONEY MARKET

Transaction have to be conducted without the help of

brokers.

It is not a single homogeneous market, it comprisesof several submarket.

There is no fixed place for conduct of operations.

The short term financial assets which deals in money

market are closed substitutes of money


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OBJEC

TIVE OF MONEY MARKET

To provide a reasonable access to users of short-term

funds to meet their requirement quickly, adequately at

reasonable cost.

To provide a parking place to employ short term

surplus funds.


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BENEFITS & FUNC

TIONS OF MONEY MARKET

For the lender/investors it provides a good return on

their funds.

For the borrower it enables rapid and relatively

inexpensive acquisition of cash.

It function is to provide focal point for RBI intervention

for influencing liquidity.


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HISTORY OF MONEY MARKET


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SCOPE OF INDIAN MONEY MARKET

It has seen growth after the globalization in

1992.

Financial instruments employ Money Market

instruments.

The performance of Indian Money Market

was outstanding in the past 20 years.


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COMPOSITION OF MONEY MARKET

Money Market consists of a number of sub-markets

which collectively constitute the money market. They

are, Call Money Market

Commercial bills market or discount market

Acceptance market

Treasury bill market


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INSTRUMENT OF MONEY MARKET

Money Market Instruments are as follows:

1. Treasury Bills

2. Commercial paper

4. Certificate of Deposits

3. Repurchase Agreements (Repo/Reverse Repo)

5. Bankers Acceptance


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TREASURY BILLS:

Safest money market instruments

Are called as T -bills.

Issued by the Reserve Bank.

Are issued with three-month, six-month and

one-year maturity periods.

T-Bills are issued through a bidding process atauctions.


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COMMERCIAL PAPER (CP):

CP is a short term unsecured loan issued by a

corporation typically financing day to day operation.

CP is very safe investment because the financial situation

of a company can easily be predicted over a few months.

Only company with high credit rating issues CPs.


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CERTIFICATE OF DEPOSIT (CD):

A CD is a time deposit with a bank.

Like most time deposit, funds can not withdrawn before

maturity without paying a penalty.

CDs have specific maturity date, interest rate and it can

be issued in any denomination.

The main advantage of CD is their safety.

Anyone can earn more than a saving account interest.


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REPURCHASE AGREEMENT (REPOS):

Repo is a form of overnight borrowing and is used by

those who deal in government securities.

They are usually very short term repurchases

agreement, from overnight to 30 days of more.

The short term maturity and government backing usually

mean that Repos provide lenders with extreamly low

risk.

Repos are safe collateral for loans.


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BANKER'S ACCEPTANCE:

A bankers acceptance (BA) is a short-term credit

investment created by a non-financial firm.

BAs are guaranteed by a bank to make payment. Acceptances are traded at discounts from face value in

the secondary market.

BA acts as a negotiable time draft for financing imports,

exports or other transactions in goods.

This is especially useful when the credit worthiness of a

foreign trade partner is unknown.


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STRUCTURE OF INDIAN MONEY MARKET

I :- ORGANISED STRUCTURE

1. Reserve bank of India.

2. DFHI (discount and finance house of India).3. Commercial banks

i. Public sector banksSBI with 7 subsidiariesCooperative banks20 nationalized banks

ii. Private banks

Indian BanksForeign banks4. Development bank

IDBI, IFCI, ICICI, NABARD, LIC, GIC, UTI etc.


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CONTINUED..

II. UNORGANISED SECTOR1. Indigenous banks2 Money lenders3. Chits

III. CO-OPERATIVE SECTOR1. State cooperative:

Central cooperative banksPrimary Agri credit societiesPrimary urban banks

2. State Land development banks:

Central land development banksPrimary land development banks


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ADVANTAGES OF MONEY MARKET

Highly liquid instruments.

Are one of the most safest investments available.

Are extremely easy to set up, via internet

Do not require any sort of minimum deposits

Generally offer higher yields than their brick-and-mortar


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DISADVANTAGES OF MONEY MARKET

Purchasing power of your money goes down, in case of

up in inflation.

Absence of integration. Lack of Bill market.

No contact with foreign Money markets.

Limited instruments.

Limited participants.


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CHARACTERISTIC FEATURES OF A DEVELOPED

MONEY MARKET

Highly organized banking system

Presence of central bank

Availability of proper credit instrument Existence of sub-market

Ample resources

Existence of secondary market

Demand and supply of fund


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RECENT DEVELOPMENT IN

MONEY MARKET

Integration of unorganized sector with the organized

sector

Widening of call Money market

Introduction of innovative instrument

Offering of Market rates of interest Promotion of bill culture

Entry of Money market mutual funds

Setting up of credit rating agencies

Adoption of suitable monetary policy Establishment of DFHI

Setting up of security trading corporation of India ltd.

(STCI)


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GROWTH OF MONEY MARKET IN INDIA

Diverse Functions

Futures of Open Market


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CONCLUSION

Today India is one of the most exciting

emerging money markets in the world.

Skilled managerial and technical manpowermatches the best available in the world.

The Average turnover on money market in India

is Rs. 40,000 crores daily.

Indias competition Private Sector has been the

backbone of its economic activities.

Money Market Presentation 2003

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