The money market refers to the institutions and arrangements that facilitate short-term borrowing and lending. It involves the trading of debt instruments with high liquidity and original maturities of one year or less, such as treasury bills, commercial paper, bankers' acceptances and certificates of deposit. The money market provides short-term funding for businesses, banks and other institutions and allows entities with temporary cash surpluses to invest their money in near-money assets.

1. MONEY MARKET
“The money market is the collective name given to the
various firms and institutions that deal in the various
grades of near money.”
- Crowther
Thus Money Market refers to the institutional
arrangements facilitating Borrowing and Lending of short
term funds.
Like :- Treasury bill , Banker’s Acceptance, Commercial
Papers etc.
Made By: Khushbu Malara, FMS, CMAT 3 SEM 1

2. 1) It involves in arrangement of short term funds.
2) It is not a market but collection of markets.
3) It is commodity market.
4) There is network of large number of participants in the
money market.
5) It is wholesale market of short term debt instruments.
6) It tell about the trends in liquidity and interest rate.
7) Transactions have to be conducted without the help of
brokers.
Characteristics of Money Market
Made By: Khushbu Malara, FMS, CMAT 3 SEM 2

3. 1) It provide short term funds to businessmen,
industrialists, trader, etc. to meet their day to day
requirements.
2) It enable businessmen, with temporary surplus funds to
invest them for a short period.
3) It serves as a medium by which the RBI exercises
control on the credit creation.
4) It serve an important guide to the government in its
monetary policy.
5) It is an important source of financing trade and industry
though bill, commercial papers, etc.
Importance of Money Market
Made By: Khushbu Malara, FMS, CMAT 3 SEM 3

4. 1) To provide a parking place to employ short term surplus
funds.
2) To provide room for overcoming short term deficits.
3) To enable the Central Bank to influence and regulate
liquidity in the economy through its intervention in this
market.
4) To provide a reasonable access to users of short-term
funds to meet their requirements quickly, adequately
and at reasonable costs.
Objectives of Money Market
Made By: Khushbu Malara, FMS, CMAT 3 SEM 4

5. Money Market Instrument & Constitutes
CLASSIFICATION OF MONEY
MARKET
CALL
MONEY
MARKET
COLLATERAL
LOAN MARKET
ACCEPTANCE
MONEY
MARKET
BILL
MARKET
COMMERCIAL
PAPER MARKET
CERTIFICATE
OF DEPOSITS
MARKET
Made By: Khushbu Malara, FMS, CMAT 3 SEM 5

6. Call money is short-term finance repayable on demand, with
a maturity period of one to fifteen days, used for inter-bank
transactions. The money that is lent for one day in this market is
known as "call money" and, if it exceeds one day, is referred to as
"notice money." Commercial banks have to maintain a minimum cash
balance known as the cash reserve ratio. The Reserve Bank of
India changes the cash ratio from time to time.
Call money is a method by which banks lend to each other to be able to
maintain the cash reserve ratio. The interest rate paid on call money
is known as the call rate. It is a highly volatile rate that varies from
day to day and sometimes even from hour to hour. There is an inverse
relationship between call rates and other short-term money market
instruments such as certificates of deposit and commercial paper. A
rise in call money rates makes other sources of finance, such as
commercial paper and certificates of deposit, cheaper in comparison
for banks to raise funds from these sources
CALL MONEY MARKET
Made By: Khushbu Malara, FMS, CMAT 3 SEM 6

7. In lending agreements, collateral is a borrower's pledge of
specific property to a lender, to secure repayment of a loan. The
collateral serves as protection for a lender against a
borrower's default—that is, it can be used to offset the loan to
any borrower failing to pay the principal and interest under the
terms of a loan obligation. If a borrower does default on a loan
(due to insolvency or other event), that borrower forfeits (gives
up) the property pledged as collateral, with the lender then
becoming the owner of the property. In a typical mortgage
loan transaction, for instance, the real estate being acquired with
the help of the loan serves as collateral. Should the buyer fail to
pay the loan under the mortgage loan agreement, the ownership of
the real estate is transferred to the bank. The bank uses the legal
process of foreclosure to obtain real estate from a borrower who
defaults on a mortgage loan obligation. A pawnbroker is an easy and
common example of a business that may accept a wide range of
items as collateral rather than accepting only cash
COLLATERAL LOAN MARKET
Made By: Khushbu Malara, FMS, CMAT 3 SEM 7

8. A promised future payment, or time draft, which is accepted and
guaranteed by a bank and drawn on a deposit at the bank. The
banker's acceptance specifies the amount of money, the date, and
the person to which the payment is due. After acceptance, the
draft becomes an unconditional liability of the bank. But the
holder of the draft can sell (exchange) it for cash at a discount to
a buyer who is willing to wait until the maturity date for the funds
in the deposit.
BANKER ACCEPTANCE
Made By: Khushbu Malara, FMS, CMAT 3 SEM 8

9. BILL MARKET
Bill of Exchange :-is govern by Indian negotiable instruments act
1881, it is a written instrument containing an unconditional orders,
signed by the maker, directing a certain person to pay a certain sum of
money only to or to order of ,a certain person, or to the bearer of the
instrument. Maturity of bills i.e. 90days, 180days, 15 months,
12months. In India 90days is most common & popular.
Treasury bill :- a TB is a particular kind of finance bill or a promissory
note put out by government of country. TB’s are issued at a discount by
the RBI on behalf of the CG as its agent. There are 4 types of TB’s
14days, 91days, 182days, 365days. In India there currently issued
91days & 365days.
Discount Market/ Houses : the efficiency , stability and
administration of the risk of insolvency of financial institutions and
banks require intuitions , arrangement and services for the best
liquidity management in financial market.
Made By: Khushbu Malara, FMS, CMAT 3 SEM 9

10. COMMERCIAL PAPER MARKET
Names of CPs are Industrial paper, Finance paper and Corporate paper
– the names depend upon whose liability the paper is. If it is a liability
of the business or industrial or commercial or manufacturing concern.
Corporate paper issued by cooperation which may be either financial or
non financial CP. Issued in domestic as well as international financial
market are known as Euro commercial paper.
CPs are primarily issued by public utility bank holding company
insurance company transportation company finance companies.
MATURITY :- CPs have a very flexible maturity in the US the
maturity period can not be more than 270 days It, varies between
three to 270 days . In UK 7 to 364 days . In France 10 days to 7
yea4rs .In Canada 30 to 365 days . In Australia 185 days.
CPS IN INDIA
The frame work of CPs is suggested by working group of money market
in 1987. RBI announced this scheme in March, 1989 in IM and it came
into effect from January 1st 1990 The maturity period of CP can not be
30 days Made By: Khushbu Malara, FMS, CMAT 3 SEM 10

11. CERTIFICATE OF DEPOSITS
CDS are bank deposit a/c which are transferable from one party to
another. They are marketable or negotiable short term instruments in
bearer from are known as negotiable certificate of deposit. Liquidity
and marketability are set to be hallmarks of CDs.
The maturity period of CDs varies between two weeks to five years.
CDS IN INDIA
In 1980 the possibility of introducing the CDs in India was been
seriously assessed the tambe working group studied in 1982 the
feasibility and recommended against it for the following reason.
(a)There is no secondary money market.(b)there was administrated
system of interest rate and ; (c) there was possibility that CDs might
gave rice fictitious transaction. Again five years letter in 1987 vaghul
working group studies the matter was given in favour of CDs so in June
1989 RBI formulated and launched a scheme permitting Banks to issued
C Ds
Made By: Khushbu Malara, FMS, CMAT 3 SEM 11

12. Institution of Money Market
Made By: Khushbu Malara, FMS, CMAT 3 SEM 12

13. Made By: Khushbu Malara, FMS, CMAT 3 SEM 13