Have you ever wondered how short-term borrowing and lending take place in financial markets? Or how banks, governments, and corporations manage their liquidity? If you’re preparing for the Treasury Investment & Risk Management Diploma, understanding the Money Market is crucial.
What is Money Market?
The Money Market is a crucial segment of the financial system that facilitates the trading of short-term financial instruments with high liquidity. It helps businesses, banks, and governments manage their short-term funding needs efficiently.
Key Features of Money Market:
- ✅ Short-term borrowing & lending (maturity less than 1 year)
- ✅ Highly liquid financial instruments
- ✅ Regulated by the Reserve Bank of India (RBI) in India
- ✅ Helps in economic growth by funding industries and businesses
- ✅ Plays a crucial role in monetary policy implementation
- ✅ A safe investment option for risk-averse investors
Key Instruments of Money Market
Treasury Bills (T-Bills)
Issued by: Central Government
Purpose: Manage cash flow and short-term funding
Maturity: 91 days, 182 days, 364 days
Risk-Free investment
Call Money & Notice Money
Used for: Inter-bank borrowing
Call Money: Maturity of 1 day
Notice Money: Maturity of 2 to 14 days
IIBF CERTIFICATION TI & RM 2025 | All about Financial Marketing
Certificate of Deposit (CDs)
Issued by: Scheduled Commercial Banks
Purpose: Time deposit with a fixed tenure
Commercial Paper (CPs)
Issued by: Corporates & Financial Institutions
Purpose: Short-term funding requirement
Cash Management Bills (CMBs)
Issued by: Central Government
Purpose: To manage temporary cash mismatches
Bill Rediscounting Scheme (BRDS)
Used by: Banks & financial institutions
Purpose: Discounting trade bills to provide liquidity
Key Participants in Money Market
Reserve Bank of India (RBI)
- Regulates & implements monetary policy
- Manages liquidity through OMO (Open Market Operations)
- Controls money supply & inflation
Central & State Governments
- Issue T-Bills & CMBs for short-term borrowing
- Helps in managing fiscal deficit
Commercial Banks
- Trade in Call/Notice/Term Money for liquidity adjustments
- Invest in Government Securities & CDs
📥 Download the PDF Guide
Also Like:
