MONEY MARKET

meaning of money market :

The money market is a market for short term funds which deals in monetary assets whose period of maturity is upto on year. These assets are close substitutes foe money. its a market where low risk, unsecured and short term debt instrument that are highly liquid are issued and actively traded everyday, its has no physical location, but is an activity conducted over the telephone through the internet. It enable the raising of short-term funds for meeting the temporary shortage of cash and obligation and the temporary deployment of excess fund foe earning returns. The major participant in the market are the reserve Bank of India (RBI), Commercial bank. Non Banking finance companies. State Government Large corporate House and mutual funds. 

Money market Instrument:


1. Treasury bill : A treasury bill is basically an instrument of short-term borrowing in less then one year. They are also know as zero coupon Bond issued by the central Government to  meet its shorts- term requirement of funds. treasury bill are issued in the form of a promissory note. They are highly liquid and have assured yield and negligible risk of default. They are issued at a price which is lower then their face value of and repaid at par. The different between to price at treasury bill are issued and their redemption value is in interest receivable on then and is called discount. Treasury bills are available for a minimun amount  of 25000 and in multiples thereof. 


2. commercial paper :  Commercial paper is a short-term unsecured promissory note, negotiable and  transferable by endorsement and delivery with a fixed maturity period it is issued by large and creditworthy companies raise short term fund at lower rates of interest then market rates. it usually has a maturity of 15 day to one year the insurance of commercial paper is an alternative to bank borrowing for large companies that are generally considered to be financially strong. it is sold at a discount and redeem at par. The original purpose of commercial paper was to provide short-term funds for seasonal and working capital needs. for example companies use this instrument for purposes such as bridge financing. 


3.Coll money: Coll money is stort-term finance repairable on demand, with a maturity periods off one day 215 day use for interbank transaction commercial bank have to maintain a minimum cash balance no edge cash reserve ratio. The digital Bank of India change the cash reserve ratio from time of time which in turn affect the amount of funds available to be given add loan by commercial bank. Call Money is the method by which bank borrow from each other to be Abel to maintain the cash reserve ratio. the interest rate paid on call money loan as know as the call rate. It is a highly volatile rate that where is from day-to-day end sometime even from hour to hour. There is an in varies relationship between cold rate and other short-term  money market instrument such as certificate to deposit and commercial paper. Aries in call money rate make other source of finance such a commercial paper and certificate of deposit chapter in comparison four bank these funds from these sources.


4.certificate of deposits: certificate of the project unsecured negotiable short-term instrument in bearer from, issued by commercial bank and development financial institution. They can be issued in individual corporation and liquidity when the deposit grow of bank is slow but the demand for credit is high. They had to mobilize a large amount of money for short. 


5. commercial bill : a commercial bill is a bill of exchange use of finance the working capital requirement of business firm. It is a short-term negotiable self liquidity instrument which is used to finance the credit sale offer. When good are sold on credit, the buyers becomes label to make payment on a specific date in future. The seller could wait till specified date or make use of a bill of exchange. The seller of the goods draw the bill and the buyers except it's. On Bing accepted, the bill becomes a marketable instrument and called a trade bill. These bill can be discounted with a bank if the seller needs fund before the bill mature. When a trade bill is accepted by a commercial bank it is no has a commercial bill. 




classification of financial markets