Money market and capital market

 

 


 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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