MONEY MARKET PARTICIPANTS (INSTITUTIONS)

The important institutions operating in money market are:

(i) Reserve Bank of India (RBI) is the most important participant of money market which takes requisite measures to implement monetary policy of the country. As the Central bank, RBI regulates the money market in India and injects liquidity in the banking system, when it is deficient or contracts the same in opposite situation.

(ii) Schedule Commercial Banks (SCBs) form the nucleus of money market. They are the most important borrower/supplier of short term funds. They mobilise the savings of the people through acceptance of deposits and lend it to business houses for their short-term working capital requirements. While a portion of these deposits is invested in medium and long-term Government securities and corporate shares and bonds, they provide short-term funds to the Government by investing in the Treasury Bills.

(iii) Co-operative Banks: Function similarly as the commercial banks.

Financial and Investment Institutions: These institutions (e.g. LIC,UTI,GIC, Development Banks etc.) have been allowed to participate in the call money market as lenders only.

(i) Corporates: Companies create demand for funds from the banking system. They raise short- term funds directly from the money market by issuing commercial paper. Moreover, they accept public deposits and also indulge in inter-corporate deposits and investments. 

(ii) Mutual Funds: Mutual funds also invest their surplus funds in various money market instruments for short periods. They are also permitted to participate in the Call Money Market. Money Market Mutual Funds have been set up specifically for the purpose of mobilisation of short- term funds for investment in money market instruments. 

(iii) Discount and Finance House of India: The Discount and Finance House of India Limited (DFHI) has been set up by the Reserve Bank of India jointly with public sector banks and all–India financial institutions to deal in short-term money market instruments. It started operations in April, 1988. At present DFHI participates in the inter-bank call/notice money market and term deposit market, both as lender and borrower. It also rediscounts 182 Days Treasury Bills, commercial bills, CDs and CPs.