INDIAN INSTITUTE OF TECHNOLOGY ROORKEE

Siddheshwar Jangid, 15119054Department of Mechanical and Industrial engineering

MONEY MARKET

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Money Market Financial market

where financial instruments are lent and borrowed for very short period (one day to one year)

The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend.

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How It’s Different From Capital Market

•Time period•Market Liquidity•Interest return•Risk – investment•participate

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INDIAN MONEY MARKET

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Money Market Account

Money market account :-• pays high interest rates than saving or checking account• provide only limited number of checking• Requires higher minimum balance .• Provides benefits of both saving and checking account

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Instruments of Money MarketInvestment in money market is done by money market instruments. Money market instruments are as follows:-

Call/notice money

Commercial papers

Repurchase agreements

Certificates of deposits

TreasuryBills

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How it’s works

• Central banking system (In India that is Reserve Bank of India) determine the level of short term interest rates by controlling monetary policies (policies which are used for money supply) of nation.

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How INTEREST IS CALCULATED

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Functions of Money Market

Money Market serve five functions

• Financing trade• Financing industry• Profitable investment• Self-sufficiency of commercial bank• Help to central bank

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Functions of Money Market

Financing trade :-• Financing domestic and international trade.• Finance Is made available to the traders through bills of

exchange, which are discounted by the bill market.

Self-sufficiency of commercial bank :-

• In the scarcity of funds they need not to borrow funds at a higher interest rate form central bank.

• On the other hand, they can meet their requirements by recalling their old short-run loans from the money market.

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Functions of Money Market

Financing industry :-

The money market contributes to the growth of industries in two ways:-

• Secure short-term loans to through the system of finance bills, commercial papers, etc.

• The short-term interest rates of the money market influence the long-term interest rates of the capital market. So it’s indirectly effect the long term loans also.

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Functions of Money Market

Profitable investment :-

The excess reserves of the commercial banks are invested in near-money assets (e.g., short-term bills of exchange) in money market, which are easily converted into cash. Thus commercial banks earn profits without sacrificing liquidity.

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Functions of Money Market

Help to central bank:-

Money markets help central banks in two ways:-

• Guide the central bank to adopt an appropriate banking policy.

• Sensitive and integrated money markets help the central bank secure quick and widespread influence on the sub-markets, thus facilitating effective policy implementation.

INDIAN INSTITUTE OF TECHNOLOGY ROORKEE

Referenceshttps://en.wikipedia.org

http://www.investopedia.comhttp://economictimes.indiatimes.com

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Summary