Significance of Money Market in Economic Development
Money market plays a crucial role in economic development by providing financial assistance to various sectors, including trade, commerce, and industry. It offers short-term finance, profitable investment opportunities, government borrowing options, and facilitates effective monetary policy implementation. Additionally, it enables fund mobilization, ensures self-sufficiency for commercial banks, and promotes savings and investments, contributing to overall financial stability.
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Presentation Transcript
FINANCIAL MARKETS
TYPES OF FINANCIAL MARKETS Money market is the major segment of the organized sector of financial system. It refers to the market wherein money is borrowed and lent for a short period. Money market deals in short term funds. It is a centre where short term money assets are purchased and sold. Money market meets the short term financial requirements of borrowers and provides liquidity or cash to the lenders. It is a market for short term loans that is loan for less than 1 year.
TYPES OF FINANCIAL MARKETS Money market is the centre for dealing mainly short term character, in monetary assets, it meets the short term requirements of borrowers and provides liquidity or cash to the lenders. It is the place where short term surplus investible funds at the disposal of financial and other institutions and individuals are bid by borrowers again compromising institutions and individuals and also government itself - Reserve Bank of India
TYPES OF FINANCIAL MARKETS Hence, Money market may be called as a reservoir or short term funds. Short term funds refer to relatively liquid assets that is which can be converted into cash without much loss. Transaction on money market may be for a period of even one day or 15 days, a month and so on but less than 365 days.
The Importance Of Money Market Is Discussed As Under Economic development: The money market plays an important role in the economic development of a country by providing financial assistance to trade, commerce and industry. It provides short term finance to public and private institution of the country. 1. Profitable investment: Money market also helps the commercial banks in investing their excess reserves in near money assets. The commercial banks invest there excess reserves into productive channels to earn profit on them. 2. Borrowing by the government: The money market also helps the government in borrowing short term funds at low rate of interest. 3.
The Importance Of Money Market Is Discussed As Under Important to Central government: Money market also helps the central government to implement the monetary policy successfully it is only through money market that the central bank can control the banking system, and thus contribute to the development of trade and commerce. 4. Mobilisation of funds: the money market also plays a very important role in transfer of funds from one sector to another the development of any economy depends on availability of finance. The trade commerce and industry of the country cannot develop without the efficient mobilization of financial resources. 5. Helpful in self- sufficiency of commercial banks: The money market also helps the commercial bank in attaining self sufficiency. The commercial banks can meet their requirements by recalling some of their loans, instead of borrowing from the central bank at higher rate of interest in case of scarcity of resources. 6. Saving and investment: Money market also contributes in promoting liquidity and safety of financial assets by encouraging savings and investments. It also helps in proper allocation of resources. 7.
