The commercial banks borrow from the Central bank and then lend to the businessmen. Lenders in money market includes Central Banks, Commercial banks, Co-operative banks, Foreign banks, Commercial house, Non-banking financial companies (Chit companies, Nidhis, Benefit societies, finance companies, factoring companies), Money lenders and indigenous bankers.Ĭommercial banks and non banking financial companies are found both on the borrowing side as well as on the lending side. Who are the borrowers in money market?īorrowers in money market consists of Government (the biggest borrower), Agriculturists (for meeting cost of cultivation), Traders, Businessmen, Commercial Banks and Non-Banking financial companies (NBFCs) Who are the lenders in money market? One is the borrower and other is the lender. There are two sets of people in the money market. Short dated bonds are issued either by government or by quasi government institutions for the purpose of raising short-term funds. These commercial papers carry credit worthiness, due to the commercial house which is issuing the commercial paper. Foreign bills arising out of foreign transactions either in the form of trade or executing any projects in foreign country.Ĭommercial paper is one which is issued by a leading commercial house and it will enable businessmen to borrow money in the market.
#The moneymoney market instruments include full
Treasury bills are issued at discount by the Government when it requires temporary loans after calling for tenders, and usually payable in full after 3 months.ĥ. Finance bill, issued by businessmen for raising short-term funds for business transactions.Ĥ. Trade bill, issued by the traders arising out of trade transactions.ģ. The bills, consisting of treasury bills are issued by the government.Ģ. Near money is one which has claim over money and is convertible into money.ġ. These are cheques, bills, promissory notes, commercial paper, treasury bills and short-dated Government Bonds. The short-term funds are borrowed by manufacturers, industrialists, traders, businessmen and even by government which issue credit instruments. When agricultural and industrial activities are affected, they in turn affect production, trade, business, employment and income and thereby the economic growth of the country. Without the short-term funds, agricultural and industrial activities in the country will come to a halt.
Short-term funds are required for working capital requirements, both in agriculture as well as in industry. Dealers in the money market are spread throughout the country.
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