Money Market – Meaning together with definition :
The term “Money Market” refers to institutional arrangements providing or facilitating, borrowing together with lending of brusque term funds to business. This is a brusque term credit marketplace amongst maturity ranging from overnight to ane twelvemonth which deals amongst relative liquid together with chop-chop marketable assets such equally bills of exchange, brusque term securities, banker’s acceptances, treasury bills of telephone commutation etc. In essence, nosotros tin hand the axe say that the coin marketplace is a brusque term credit market.
The Reserve Bank of Bharat defines coin marketplace equally “Money marketplace is a marketplace for brusque term fiscal assets that are unopen substitutes for money, facilitates the telephone commutation of coin for novel fiscal claims inwards the primary marketplace equally also for fiscal claims,h already issued, inwards the secondary market”.
According to Crowther “Money Market is a collective mention given to the diverse forms together with institutions that bargain amongst the diverse grades of close money”.
Characteristics of Indian Money Market :
Indian Money Market consists of 2 sectors. Those are 1. Organized together with 2. Unorganized sectors. This dichotomy (division of 2 parts) of Indian Money marketplace into organized together with unorganized sectors itself a particular feature of Indian Money market.
- Mixed Business of Money Lending together with Trading : The Unorganized agencies of Indian Money marketplace viz, indigenous bankers together with coin lenders acquit mixed concern of coin lending together with trading.
- Informal Dealings : The dealings betwixt the agencies of unorganized sector together with the borrowers are informal inwards nature.
- Simple Accounting System : The indigenous bankers together with coin lenders of Indian Money marketplace keep their accounts inwards a really uncomplicated together with indigenous cast inwards the local language.
- Flexibility inwards Lending : The loan functioning of agencies of unorganized sector of Indian coin marketplace are really flexible inwards nature without next stiff rules. In approximately cases they grant instant loans without payment of begin loan.
- Personal Contract amongst the Borrowers : Most of the concern of unorganized agencies of Indian coin marketplace depends on personal contracts amongst the borrowers.
- Secrecy of Business : The dealing of unorganized sector or Indian Market are kept inwards secret. Kakar Gopal inwards his book, named “Unorganized Money Markets India” has commented regarding the working of unorganized sector of coin marketplace equally follows. “It is inwards the method of working rather than inwards the nature of concern that indigenous agencies similar moneylenders together with indigenous bankers stand upwards inwards marketplace contrast amongst modern institutions of the Indian coin market”.
The effects of Dichotomy
As nosotros stated earlier, the dichotomy of the Indian Money marketplace into organized together with unorganized sectors is a particular characteristic. But it has certainly adverse effects likewise on the working of the fiscal scheme inwards the country.
- Check on Bank Habit : On concern human relationship of widespread indigenous bankers together with moneylenders amongst their informal methods of dealings inwards rural areas, banking habits amidst the rural people is commonly discouraged.
- Minimization of Bank Credit : On concern human relationship of the broad coverage of moneylenders together with indigenous bankers inwards the countryside inwards catering to the credit needs of the rural economy, the role of depository fiscal establishment credit has been minimized.
- Check on the Monetization Process : The unorganized sector of the coin marketplace is responsible for restricting the mass of monetary transactions together with perpetuating non-monetized transactions which hinder the progress of monetization inwards the rural economy.
- Ineffective Tapping together with Mobilization of Savings : On concern human relationship of the beingness of the unorganized sector, people inwards rural Bharat are deprived of the attractive / remunerative saving schemes which could encourage their savings. Hence, rural savings potentials are non effectively mobilized for productive investment together with majuscule formation.
- Perference for Cash Transactions : Indigenous bankers render no depository fiscal establishment stand upwards for facilities. Thus, inwards rural areas, inwards the absence of adequate modern banking facilities, at that spot has been a restricted role of depository fiscal establishment stand upwards for system. Hence, dealings inwards cash payments are e’er preferred to cheques inwards rural trade.
That’s all for straightaway friends. In our side past times side lesson nosotros shall hash out virtually the Structure, Problems together with reforms of Indian Money Market. Happy Reading 🙂