The Indian banking system is
classified into two types .
1) money market
2) capital market
money market
The market in which short-term transactions take place is called money market.
Money market transactions have a term of less than 13 months.
Documents used in money market transactions are called bills or papers.
Money market transactions are short term.
Capital market
Capital market transactions are medium or long term.
The documents used in this market are called bonds or shares.
Uncertainty is high in capital market.
Functions of Money Market
1. Call money Market
It's part of money market
In that market lender and borrower both are banks
When bank need fund for short term or over night then bank can take loan from other bank and returned in timeline period.
In that transition bank would charge intrest it's connected with
LIBOR - LONDON INTER BANK OFFERED RATE
OR
RIBOR- RESERVE BANK INTER BANK OFFERED RATE
In that market 80%funding provide by IDBI,LIC and GIC.
2.Treasury Bills
It's another function of money market. There are 14day,92days,182days,364days Treasury bills are available. Indian Government building money form Treasury Bills. It was introduced by RBI Investors, companies, Institutions are investing in Treasury Bill.
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