What Is Money Market And Its Functions?

Functions of the Money Market

The money market contributes to the economic stability and development of a country by providing short-term liquidity to governments, commercial banks, and other large organizations.

Investors with excess money that they do not need can invest it in the money market and earn interest.

What is money market with example?

A market can be described as a money market if it is composed of highly liquid, short-term assets. This includes assets such as certificates of deposit (CDs), interbank loans, money market funds, Treasury bills (T-bills), repurchase agreements, commercial paper, and short-term securities loans.

What is money market and its features?

Salient Features of Money Market

Participants include banks, mutual funds, investment institutions and Central Banks. There is an impersonal relationship between the participants in the money market, and so, pure competition exists.

What do you mean by money market?

Definition of ‘Money market’

Definition: Money market basically refers to a section of the financial market where financial instruments with high liquidity and short-term maturities are traded. It is used by the participants as a way of borrowing and lending for the short term.

Can you lose your money in a money market account?

High-risk money market fund holdings can lose value in volatile market conditions or if interest rates drop, but they can produce more income. Because they are considered investments and not deposits, money market funds are not insured against loss by the FDIC.

What are the types of money market?

Following are the types of Money Market Instruments:

  • Promissory Note: A promissory note is one of the earliest type of bills.
  • Bills of exchange or commercial bills.
  • Treasury Bills (T-Bills)
  • Call and Notice Money.
  • Inter-bank Term Market.
  • Commercial Papers (CPs)
  • Certificate of Deposits ( CD’s )
  • Banker’s Acceptance (BA)

What are the problems of money market?

The problems include: liquidity crisis, non-performing loans, growing gap between lending and deposit growth, widening current account deficit, a distortion in the interest rate market and a lack of skilled manpower. The observations came at a meeting on the prevailing money market situation and the way forward.

What is an example of a money market?

There are several money market instruments in most Western countries, including treasury bills, commercial paper, bankers’ acceptances, deposits, certificates of deposit, bills of exchange, repurchase agreements, federal funds, and short-lived mortgage- and asset-backed securities.

What is Money market structure?

Structure & Functions of Money Market in India. Thus, money markets is that segment of financial markets where borrowing and lending of the short-term funds takes place. The maturity of the money market instruments is one day to one year. In our country, Money Markets are regulated by both RBI and SEBI.

What is the purpose of a money market?

Purposes of the Money Market

If you end up investing your funds in the money market, you can quickly and easily secure this interest. Holding your money in cash means you won’t earn interest. The major attributes that draw an investor to short-term money market instruments are superior safety and liquidity.