Money Market is a Market for trading in short-term loans between banks and financial institutions. Participants in the money market borrow and lend for the short term.
The short-term instruments in the Money Market are inter-bank call money market, Treasury Bills (91 days and 364 days), Certificates of Deposits, Commercial papers, Repurchase agreements and so on.
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Features of the Indian Money Market:
The RBI is highly impacted by the functioning of the Indian Money Market. Therefore, the efficiency of the Money Market is very important.
- It is through the Money Market that surplus funds move to deficit areas. This helps in tackling temporary liquidity crisis in the country.
- If the Money Market is not in sync with the RBI, the Central Bankmay not achieve its desired goals.
- Government deficits are financed through the Money Market in a non-inflationary way.
That’s why you can say that Money Market is a ‘barometer’ of the Central Banking operations.
Read the Article | Features Of Indian Money Market
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