30 Quick Facts on Money Market in India
Effective for SBI PO , IBPS PO Mains Exams 2017Q. What is Money Market ?
Money market is a subscrtion of the fixed income market, where money market instruments and Short term maturities are traded at high liquidity. It is also known as dealer market which means that firms buy and sell Securities at own risk and sold at High Denomination.
Q. What is the Difference between Money Market and Stock Market ?
In Money Market The Instruments are traded at High denominations where as in Stock Mraket its below compare to Money Market.
Q. What are the major Instruments of Money Market ?
Generally 5 Major Instruments are as follows -
Q. What is the difference between Money Market and Capital Market ?
- Money Market - 7 days to 1 Years
- Capital Market - More Than 1 YEARS
Q. What is Call Money ?
Call money are those in which funds are transacts on overnight basis. Participants are Major Banks excluding Regional Rural Banks.
Q. Who decide the Rate of Interest in Call Money ?
Genrally, As per the guidelines Banks are liable to decide the Rate of Interest for Overnight Funds.
Q. What is Notice Money ?
Notice Money are those in which Funds are transacted from 2 Days to 14 days. Participants are Major Banks excluding Regional Rural Banks.
- Certificate of Deposite or Short Term Commercial papers are considered to be as money market instruments.
- Certificate of deposits are issued by commercial banks and development financial organisations.
- It was first introduce in 1989 by Countries central Bank i.e. Reserve Bank of India.
- Commercial Papers are one of the main Instruments of Money Market. It is generally issued by Highly rated banks and some major non financial organisations.
- Commercial Papers are issued in denominations of Rs. 5 Lakh or its multiple.
- First Commercial Papers were issued in 1990 in Indian Money Market.
- Treasury Bills is also an Instrument of Money Market, It matures in 1 year or Less.
- Generally Treasury bills are purchased at a price which is less than its face value (Par Value), But when it matures the Govt. pays the Face value of the Bill.
- Treasury Bills are available at market for a minimum value of Rs. 25,000 and its multiple.
- First Tresury Bills were issued by Govt. of India in 1971.
- Generally 3 Types of Treasury bills are issued , namely for a period of 91 days, for a period of 182 days, and for a period of 364 days.
- It is a short term financial instruments that are issued by Reserve bank of India (Countries central bank).
- The instruments that can be transferred from one person to another person by endorsement - Promisorry Note, Bill of Exchange, Cheque.
- Token Money - It is a money whose face value (Par Value) is is higher than its intrinsic value.
- Adjacent Money - Its not a money, but you can say its similar to Liquidity/ Money because its nature of liquidity is higher in comparison to other Government bonds, Debentures.
Important Points to Remember
Maturity Period of Certificate of Deposits / Commercial Papers -
- Minimum - 7 Days
- Maximum - 1 Years. In case of financial institutions it can be up to 3 Years.
Maturity Period of T - Bills /Treasury Bills -
- 91 Days, 182 Days, 364 Days.