(i) It is one market but collection of markets, such as, call money, notice money, repo’s, term money, treasury bills, commercial bills, certificate of deposits, commercial papers, inter-bank participation certificates, inter-corporate deposits, swaps, futures, options, etc. and is concerned to deal in particular type of assets, the chief characteristic is its relative liquidity. All the sub-markets have close inter-relationship and free movement of funds from one sub- market to another. There has to be a network of large number of participants which will add greater depth to the market.
(ii) The activities in the money market tend to concentrate in some centre which serves a region or an area; the width of such area may vary considerably in some markets like London and New York which have become world financial centres. Where more than one market exists in a country, with screen-based trading and revolutions in information technology, such markets have rapidly becoming integrated into a national market. In India, Mumbai is emerging as a national market for money market instruments.
(iii) The relationship that characterises a money market should be impersonal in character so that competition will be relatively pure.
(iv) In a true money market, price differentials for assets of similar type (counterparty, maturity and liquidity) will tend to be eliminated by the interplay of demand and supply. Even for similar types of assets, some differential will no doubt continue to exist at any given point of time which gives scope for arbitrage.
(v) Due to greater flexibility in the regulatory framework, there are constant endeavours for introducing new instruments/innovative dealing techniques; and
(vi) It is a wholesale market and the volume of funds or financial assets traded in the market are very large.
(vii) The Indian money market has a dichotomic structure. It has a simultaneous existence of both the organized money market as well as unorganised money markets. The organised money market consists of RBI, all scheduled commercial banks and other recognised financial institutions. However, the unorganised part of the money market comprises domestic money lenders, indigenous bankers, trader, etc. The organised money market is in fully controlled by RBI. However, unorganised money market remains outside the RBI control.
(viii) The demand for money in Indian money market is of a seasonal nature. India being an agriculture predominant economy, the demand for money is generated from the agricultural operations. During the busy season i.e. between October and April more agricultural activities takes place leading to a higher demand for money.
(ix) In the Indian money market, the organized bill market is not prevalent. Though the RBI tried to introduce the Bill Market Scheme (1952) and then New Bill Market Scheme in 1970, still there is no properly organized bill market in India.
(x) In our money market the supply of various instruments such as the Treasury Bills, Commercial Bills, Certificate of Deposits, Commercial Papers, etc. is very limited. In order to meet the varied requirements of borrowers and lenders, it is necessary to develop numerous instruments.
No comments:
Post a Comment