The money market concerns trading in money
instruments involving borrowing and lending for short periods. It is part of
the securities market. The other part is capital market which deals with
long-term instruments like equity or shares, debentures and bonds. It provides long-term
finance to the government and firms, mostly large ones.
Money Market is a short-term credit market.
It is the centre in which short-term funds are borrowed and lent. It consists
of borrowers and lenders of short-term funds. The borrowers are generally
merchants, traders, brokers, manufacturers, speculators and Government. The lenders
are commercial banks, insurance companies, finance companies and the central bank.
The money market brings together the lenders and the borrowers. It does not
deal in cash or money. It deals in trade bills, promissory notes and government
papers or bills, which are drawn for short-periods.
Dr. S.N. Sen defines money market as “the
organisation for the lending of short-term funds, through the use of such
instruments as commercial bills of exchange, short-term government securities
and bankers acceptances.”
The Reserve Bank of India describes money
market as “the centre for dealings, mainly of a short-term character, in
monetary assets, and it meets the short-term requirements of borrowers and
provides liquidity or cash to lenders.”
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