B. A. (Hon). Economics
VI Semester
Paper Name : Money and Financial Markets
Dear Students, we have discussed Topic-5 in the previous lecture Notes.
Now, in this week we will continue of the same chapter last topic: Many
Markets and monetary policy as I already suggested readings of M.Y.Khan,
A. Vasudevan and RBI Annual Reports.
Topic-5
CENTRAL BANKING AND MONETARY POLICY
Functions, Balance Sheet Goals, Targets, Indicators and instru-
ments of monetary control, monetary management in an open econ-
omy, current monetary policy in India.
Money Markets
The money market is a market for overnight to short-term funds, and
for short-term money and financial assets that are close substitutes for money
"short-term", in Indian context, generally means a period upto one year;
"close substitute for money" denotes any financial assets that can be quickly
converted into money with minimum transaction cost and without loss in
value.
The major participants in the market are the commercial banks, the
other financial intermediaries, large corporates and the Reserve Bank of In-
dia(RBI). Being the residual residual resources of funds, RBI plays a pivotal
role and occupies a strategic position in the Indian money market. By vary-
ing liquidity in the market through various instruments, it influences the
availability and cost of credit. In fact, a developed money market contributes
to an effective monetary policy.
, The broad objectives/functions of the money market are to provide:
(i) An equilibrating mechanism fo evening out short-term surpluses and defi-
ciencies.
(ii)A focal point of central bank (RBI) intervention for influencing liquidity
in the economy and
(iii)A reasonable access to the users of short-term funds to meet their re-
quirements at realistic/reasonable price/cost.
Features
The money market has certain distinct operational features as compared to
the capital market. First, while in the money market the operations are for a
short duration in the capital market they are for longer durations/periods, al-
though at times the distinction/demarcation between the two segments of the
market is not clearly market out. The volume of funds/financial asserts rep-
resenting the money traded in the market is very large.
Finally, the money market consists of a number of interrelated sub-
markets such as the call market, the commercial bill market, the treasury bill
market, the commercial paper market, the certificates of deposit market an so
on. The main objective of this Chapter is to present a summarised view of
the money market in India.
Figure- Money Market Organisation in India
VI Semester
Paper Name : Money and Financial Markets
Dear Students, we have discussed Topic-5 in the previous lecture Notes.
Now, in this week we will continue of the same chapter last topic: Many
Markets and monetary policy as I already suggested readings of M.Y.Khan,
A. Vasudevan and RBI Annual Reports.
Topic-5
CENTRAL BANKING AND MONETARY POLICY
Functions, Balance Sheet Goals, Targets, Indicators and instru-
ments of monetary control, monetary management in an open econ-
omy, current monetary policy in India.
Money Markets
The money market is a market for overnight to short-term funds, and
for short-term money and financial assets that are close substitutes for money
"short-term", in Indian context, generally means a period upto one year;
"close substitute for money" denotes any financial assets that can be quickly
converted into money with minimum transaction cost and without loss in
value.
The major participants in the market are the commercial banks, the
other financial intermediaries, large corporates and the Reserve Bank of In-
dia(RBI). Being the residual residual resources of funds, RBI plays a pivotal
role and occupies a strategic position in the Indian money market. By vary-
ing liquidity in the market through various instruments, it influences the
availability and cost of credit. In fact, a developed money market contributes
to an effective monetary policy.
, The broad objectives/functions of the money market are to provide:
(i) An equilibrating mechanism fo evening out short-term surpluses and defi-
ciencies.
(ii)A focal point of central bank (RBI) intervention for influencing liquidity
in the economy and
(iii)A reasonable access to the users of short-term funds to meet their re-
quirements at realistic/reasonable price/cost.
Features
The money market has certain distinct operational features as compared to
the capital market. First, while in the money market the operations are for a
short duration in the capital market they are for longer durations/periods, al-
though at times the distinction/demarcation between the two segments of the
market is not clearly market out. The volume of funds/financial asserts rep-
resenting the money traded in the market is very large.
Finally, the money market consists of a number of interrelated sub-
markets such as the call market, the commercial bill market, the treasury bill
market, the commercial paper market, the certificates of deposit market an so
on. The main objective of this Chapter is to present a summarised view of
the money market in India.
Figure- Money Market Organisation in India
