Functions of Money Market

A well-organized and developed money market can help a country to achieve economic growth and stability. It performs a diversity of functions in the banking structure of the economy. They are:

(a) Money market provides outlets to commercial banks, non-banking financial concerns, business corporations and other investors for their short-term funds. It enables them to use their excess reserves in profitable investment.

(b) Money market also provides short-term funds to businessmen, industrialists, and traders etc. to meet their day-to-day requirements of working capital. Money market plays a crucial role in financing both internal as well as international trade.

(c) Money market provides short-term funds not only to private businessmen but also to government and its agencies.

(d) Money market enables businessmen, with temporary surplus funds, to invest them for a short period.

(e) Money market serves as a medium through which the central bank of the country exercises control on the creation of credit.

(f) Money market is also of great help to the government.

The functions of the money market are virtually the same in all the countries of the world. But the institutions, instruments and modes of operation are different in different money markets.