Banking System

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Indian banking system is divided into two parts.

1) Indian money market

2) Indian Capital Market

Indian Money Market:

 It involves short-term money transactions. Money market transactions are less than 13 months old.
Documents used in this market are called bills or papers.
Money market is a good option for secured investment. Profit is guaranteed, even though there is not a great deal of profit in this market.
Money market is divided into two types of area.

1) Unorganized sector: It includes lenders, local banks, non-banking financial institutions.

2) organized sector: There are commercial banks in it.

The Reserve Bank works as a regulator for the organized sector.

Indian Capital Market:

Here the medium and long term money transactions happen.
Documents used in this market are called shares or bonds.
The Government of India,Reserve Bank, NABARD, SEBI,plays the role of the intermediary in the capital market.


 Indian Money Market:

Call Money Market:

These are very short-term transactions. These are the transactions for one day / overnight or for a few days. 80% of the borrowing in call money market in India is provided by major organizations of IDBI, LIC,GIC. In this case, there are also lending banks, whereas borrowers are also bank.
Interest rates in bank banks are linked to the LIBOR-London Inter Bank Offered Rate
RIBOR- Reserve Bank Inter Bank Offered Rate
With these interest rates

Treasury bill:

The Government of India raises money for short-term by selling Treasury bills. These transactions happen through the Reserve Bank. It means that if there is a lending government of India, there are different borrowers and commercial banks. Such bills are for 14 days, 91 days, 182 days, and 364 days.

Commercial Bill Market:

Certificate Of Deposit:

 Certificate of Deposit Bank will sell for at least one lakh rupees. Their period ranges from 3 months to 1 year. Such a certificate of deposit has a face value.

Commercial Paper:

Different companies sell commercial paper to raise money from the money market. Companies can sell commercial papers worth at least Rs. 25 lakhs. The deadline is 3 to 6 months.


Indian Capital Market:

The Government Securities Market:

The Reserve Bank is raising money for the government by selling long-term government securities with the central government and the state government.
Government securities have high security and high liquidity, so they are called gilt as security. The market is called Gilbert's Market. (Gilts means gold)

Industrial Securities Market:
The transactions of securities other than government securities are traded in the industrial securities market. In this market, old and new companies sell securities in the form of shares or bonds. So this market is called Share Market or Stock Market.

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