![]() The banks can get back the funds quickly, in times of need, by resorting to the money market. Smooth Functioning of Commercial Banks: The money market provides the commercial banks with facilities for temporarily employing their surplus funds in easily realizable assets.Hence, the development of capital depends upon the existence of a development of capital money market. Development Of Capital Market: The short-term rates of interest and the conditions that prevail in the money market influence the long-term interest as well as the resource mobilization in capital market.The money market, through discounting operations and commercial papers, finances the short-term working capital requirements of trade and industry and facilities the development of industry and trade both - national and international. Development Of Trade And Industry: Money market is an important source of financing trade and industry.A developed money market helps the smooth functioning of the financial system in any economy in the following ways: Therefore, a developed money market is highly indispensable for the rapid development of the economy. The money market is an integral part of a country’s economy. Money market securities are generally very safe investments, which return relatively low interest rate that is most appropriate for temporary cash storage or short term time needs.Ī developed money market plays an important role in the financial system of a country by supplying short-term funds adequately and quickly to trade and industry. Examples of these include bankers’ acceptances, repos, negotiable certificates of deposit, and Treasury Bills with maturity of one year or less and often 30 days or less. Money markets are the markets for short-term, highly liquid debt securities. The sincere efforts for developing the money market were made when the financial sector reforms were started by the government. Interest rate on the instruments was under the regulation of Reserve Bank of India. ![]() The limited variety and instruments were available. Indian money market was highly regulated and was characterized by limited number of participants. Commercial Bills Market or Discount Market.The following are the main sub-markets of a money market: There should be competition within each sub-market as well as between different sub-markets. It consists of a number of sub-markets which collectively constitute the money market. The money market is not a single homogeneous market.
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