Paper Key : IRJ************588
Author: Sammi Reddy Vijaya Raghava Reddy
Date Published: 04 Apr 2024
Abstract
In India the money market plays a vital role in the progress of economy. But it is not well developed when compared to American and London money markets. In this market short term funds are borrowed and lent among participants permitted by RBI. Money Market ensures that institutions which have surplus funds earn certain returns on the surplus. Otherwise, these funds will be idle with the institutions. Similarly, the money market ensures funds for the needy at reasonable interest. This way liquidity position is assured by money market operations. Let us now discuss the various money market instruments in India. In India the Money Market is regulated by RBI. Hence, the instruments traded and the players in the market require to be approved by RBI. The average turnover of the money market in India is over Rs. 40,000 crores daily. This is more than 3 percent of the total money supply in the Indian economy and 6 percent of the total funds that commercial banks have let out to This implies that 2 percent of the annual GDP of India gets traded in the money market in just one day. Even though the money market is many times larger than the capital market, it is not even fraction of the daily trading in developed markets.