Easy way to understand money market & its instuments.

1. Money Market

2. Overview Of Financial Market

3. • Money market is where financial instruments with highly
liquidity and very short maturities are traded.
• Money market become a component of the financial markets
for assets involved in short-term borrowing, lending, buying
and selling with original maturities of one year or less.
What is Money Market ?

5. • Commercial Bank
• Central Bank
• Mutual Funds
• Investment Institution
Market Participants.

6. • Certificate of deposits
• Commercial Bills
• Commercial Paper
• Treasury Bill
• Repurchase Agreements
• Call Money
• Federal Fund
Instruments

7. • A certificate of deposit (CD) is a savings certificate with a
fixed maturity date, specified fixed interest rate and can be
issued in any denomination aside from minimum
investment requirements.
• A CD restricts access to the funds until the maturity date of
the investment.
• CD are subject to payment of Stamp Duty under Indian
Stamp Act 1899 (Central Act)
Certificate Of Deposits

9. • The commercial bills are issued by the seller (drawer) on the
buyer (drawee) for the value of goods delivered by him.
• These bills are of 30 days, 60 days or 90 days maturity.
• Some of the examples of Commercial Bills are Bills of
Exchange, Inland Bills, Foreign Bills .
Commercial Bills

10. • Commercial paper is an unsecured promissory note with a
fixed maturity of no more than 270 days.
• It is not backed by collateral so only firms with excellent
credit ratings from a recognized credit rating agency will be
able to sell their commercial paper at a reasonable price.
Commercial Paper

12. • Treasury bills, commonly referred to as T-Bills are issued by
Government against their short term borrowings
requirements with maturities ranging between 14 to 364
days.
• All these are issued at a discount-to-face value.
Treasury Bills

14. • Financing Trade
• Financing Industry
• Profitable Investment
• Self-sufficiency of commercial bank
• Helps to central bank
Functions Of Money Market.

15. • The money market plays crucial role in financing domestic
and international trade.
• Commercial finance is made available to the traders through
bills of exchange, which are discounted by the bill market.
Financing Trade

16. • They help industries secure short-term loans to meet their
working capital requirements through the system of finance
bills, commercial papers, etc
Financing Industry

17. • The Money Market enables the commercial banks to use
their excess reserves in profitable investment.
• The main objective of the commercial banks is to earn
income from its reserves as well as maintain liquidity to
meet the uncertain cash demand of the depositors.
• In the money market, the excess reserves of the commercial
banks are invested in near-money assets (e.g., short-term
bills of exchange), which are easily converted into cash.
Thus, commercial banks earn profits without sacrificing
liquidity.
Profitable Investment

18. • Developed money markets help the commercial banks to
become self-sufficient.
• In the situation of emergency, when the commercial banks
have scarcity of funds, they need not approach the central
bank and borrow at a higher interest rate. On the other
hand, they can meet their requirements by recalling their old
short-run loans from the money market
Self-sufficiency of Commercial Bank

19. • Money markets help central banks in two ways –
• Short-run interest rates serve as an indicator of the monetary and
banking conditions in the country and, in this way, guide the central
bank to adopt an appropriate banking policy,
• Sensitive and integrated money markets help the central bank secure
quick and widespread influence on the sub-markets, thus facilitating
effective policy implementation
Help to Central Bank

20. THANK YOU