FINANCIAL MARKET :-
Finance is the integral part of
modern business and life-blood of all economic activities. The financial system
of a country works through a set of financial markets and financial
institution. Financial markets are those which deal in financial assets and
credit instruments of different types such as currency, cheques, bill bonds,
bank deposits, hundies etc. Financial market is essence in the credit market.
The main functions of financial markets are:-
i. To
facilitate creation and allocation of credit and liquidity.
ii. To
serve as intermediaries in the process of mobilization of saving in the
economy.
iii. To
assist the process of economic development through a more balanced regional and
sector wise distribution of investible funds, and
iv. To provide financial convenience
to the people.
Categories or kinds of Financial
market:-
The financial markets are broadly
divided into the following two major categories:-
Money Market, Capital Market.
MONEY MARKET
INTRODUCTION:-
The term money market refers to the
totality of financial institutions which deal with short term funds in the
economy . These financial institutions advance to the needy borrowers only
short-term funds to meet their requirements. The money market brings together
the lenders (who have surplus short-term investible funds) and the borrowers
(who are in need of short-term credits). The borrowers in the money markets are
generally merchants, brokers, manufacturers, speculators and even government
institutions. The lenders in the money market, on the other hand, are commercial
banks, institution companies, non-bank
financial concerns and the central banks of the country. Thus, the money market
represents the country's pool of short- term investible funds to meet the
short-term requirements of the economy.
The
money market it should be remembered deals only with short-term funds. In a
money market, funds can be borrowed for short periods varying from a day, a
week, a month or 3 to 6 months against different types of securities, such as
bills of exchange, banker's acceptance, bonds etc.
The
money market does not refer to a particular place where money is borrowed and
lent by the parties concerned. It is not necessary for the borrowers and the
lenders to establish personal contract with each other at some definite place.
In fact, personal contact between the borrowers and the lender is not even
necessary for the purpose of negotiation. The borrowers and the lenders may
carry on negotiations through mail or on the telephone. Anyways, personal
presence of the two parties is not essential for completing financial
transactions in the money market.
MEANING:-
Money market refers to the
institutional arrangements dealing with the short-term borrowing and lending of
funds. It is a short term credit market which deals with the relatively liquid
and quickly marketable assets, like short-term government securities, treasury
bills of exchange.
DEFINITION:-
According to The Reserve Bank of
India" The money market is the centre for dealing mainly of a short-term
character; in monetary assets it meets the short term requirements of borrowers
and provides liquidity or cash to the lenders."
According
to Crowther, "Money market is collective name given to the various forms
and institutions that deal with the various grades of near-money."
The
term money market may be distinguished from the term 'Capital Market'. The
money market as pointed out above, deals only with short term finances,the
capital market on the other hand, deals with long-term funds. Through the
functions of the two markets are different, yet they may be closely related with each other. In
fact, there may be some sort of overlapping between the two markets. The
financial institutions at least some of them may be common to both the markets.
In other words, such institutions may be dealing with both short-term as well
as long-term finances. But, broadly speaking, commercial banks concern
themselves with long-term funds.
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