2. Money market can be defined as a market for short-term
funds with maturities ranging from overnight to one year
and includes financial instruments that are considered to
be close substitutes of money.
Money market plays a central role in the monetary policy
transmission mechanism by providing a key link in the
operations of monetary policy to financial markets and
ultimately, to the real economy.
4. The Indian money market has dichotomic structure.
It has a simultaneous existence of both organized money
market as well as unorganized money markets.
The organized money market consists of RBI, all scheduled
commercial banks and other recognized financial
However, the unorganized part of the money market
comprises domestic money lenders, indigenous bankers,
7. Reserve Bank Of India (RBI).
Schedule Commercial Banks (SCBs).
Non-Banking financial companies (NBFCs) and
Financial Institutions like LIC,UTI,GIC development
banks are also operating in the Indian money
8. Call money market.
Treasury Bill market.
Bill of Exchange.
Inter-Bank term money
Commercial paper market.
Certificate of Deposit.
9. The Call money market deals in short term finance
repayable on demand, with a maturity period varying
from 1 day to 14 days.
The Call money market has been transformed into a
pure inter-bank market during 2006-07.
Written, signed, unconditional, and unsecured
promise by one party (promisor) to another
(promisee) that commits the maker to pay a specified
sum on demand, or on a fixed or a determinable date.
10. Repurchase agreement involves a simultaneous “sale
and purchase” agreement.
The rate at which the RBI lends money to commercial
banks is called repo rate, a short term for repurchase
Treasury bills are instrument of short-term borrowing by
the Government of India, issued as promissory notes under
It is an IOU (I Owe You) of the Government. It is a
promise by the Government to pay a stated sum after
expiry of the stated period from the date of issue
(14/91/182/364 days i.e. less than one year).
11. A written, unconditional order by one party (the drawer)
to another (the drawee) to pay a certain sum, either
immediately or on a fixed date, for payment of goods or
services received. The drawee accepts the bill by signing it,
thus converting it into a post-dated check and a binding
Inter-bank market for deposits of maturity beyond 14
days (15 days–I year)is referred to as the term money
12. Commercial paper is a money market security issued by
large corporations to obtain funds to meet short-term
debt obligations, and is backed only by an issuing bank or
corporation’s promise to pay the face amount on the
maturity date specified on the note.
The CDs are negotiable term-deposits accepted by
commercial bank from bulk depositors at market related
13. Monetary policy is the process by which monetary
authority of a country, generally a central bank controls
the supply of money in the economy by its control over
interest rates in order to maintain price stability and
achieve high economic growth.
In India, the central monetary authority is the Reserve
Bank of India (RBI).
15. Monetary operations involve monetary techniques
which operate on monetary magnitudes such as money
supply, interest rates and availability of credit aimed to
maintain Price stability, stable Exchange rate , Healthy
Balance of Payment, Financial stability, Economic
RBI, the apex institute of India which monitors and
regulates the monetary policy of the country stabilizes
the price by controlling the Inflation.
16. Price Stability.
Controlled Expansion of Bank Credit.
Promotion of Fixed Investment.
Restriction of Inventories.
Promotion of Exports and Food.
Desired Distribution of Credit.
Equitable Distribution of Credit.
To Promote Efficiency.
Reducing the Rigidity.
17. An open market operation involves buying or selling of
government securities from or to the public and banks.
The RBI sells government securities to contract the flow
of credit and buys government securities to increase
18. Every financial institution has to maintain a certain
quantity of liquid assets with themselves at any point of
time of their total time and demand liabilities.
CRR is a certain percentage of bank deposits which banks
are required to keep with RBI in the form of reserves or
If CRR increase, then rate of interest in the economy will
increase and vice versa.
19. The rate at which the commercial bank take loan from
If repo rate is increased, then rate of interest will also
The rate at which the commercial bank deposits their
surplus money with RBI.
If reverse repo rate increased, then the rate of interest will
also be increased..
The increase in Repo rate and Reverse repo rate is a
symbol of tightening of the policy.
20. It is a method of persuading and convincing the
commercial bank to advance credit in the advanced with
the direction of the central bank in overall economic
interest of the country.
The central bank is empowered to increase the lending
margin with a view to decreasing the bank credit.
21. The Reserve Bank of India, the nation’s central bank,
began operations on April 01, 1935.
It was established with the objective of ensuring monetary
stability and operating the currency and credit system of the
country to its advantage.
The origins of the Reserve Bank of India can be traced to
1926, when the Royal Commission on Indian Currency and
Finance – also known as the Hilton-Young Commission –
recommended the creation of a central bank for India to
separate the control of currency and credit from the
Government and to augment banking facilities throughout
22. Reserve Bank of India was nationalized in the year
RBI has one Governor and four Deputy Governor. The
tenure of each is 3 years. The current Governor is Dr.
The Reserve Bank of India Act of 1934 established the
Reserve Bank and set in motion a series of actions
culminating in the start of operations in 1935.
RBI act passedHilton Young
Commission RBI commences operations in
Kolkata as a shareholders bank
RBI central office
moves to Mumbai