Hello guys in this blog we will discuss about money Market and its instruments .
Money Market
Money market is a market for short term funds that deals in the monetary assets which has period of maturity up to one year.
Major participants in money Market
-The Reserve Bank of India
-Commercial Banks
-Non banking finance company
-State governments
-Large corporate houses
-Mutual funds
Some features of Money market
Money market instruments are the close substitute of money.
They are unsecured and short term debt securities .
They are less risky.
They are highly liquid.
Money market instruments
1.Commercial paper
They are short term promissory note transferable by endorsement and delivery with a fixed period . They are issued by large companies which are financially strong in order to raise funds at lower rates of interest than the rate of market.
2.Treasury bill
A treasury bill is a instrument issued by the reserve Bank of India on behalf of the government to meet the short term funds They are highly liquid and has negligible risk of default. They are also known as Zero coupon bonds .
3.Call money
Call money is a short term finance used in inter bank transactions. It is payable on the demand, with a period of one day to 15 days . The rate paid on call money is known as call rate.
4.Certificate of deposit
They are unsecured, negotiable, and short term instument issued by banks and some financial institutions . They are issued to the individuals corporations or companies.
5.Commercial bill
A commercial bill is a short term and self liquidating instrument which is used in finance of credit sales of firm. It is a bill of exchange used in finance of working capital requirements in a firm .
So this is all about the Money market . Hope it helps.