Top 15 – Characteristics of Indian Money Market

Characteristics of Indian Money Market-What are Indian Money Market Characteristics-What are the Main Characteristics of a Indian Money Market

Most Western countries make it easy to get money market funds, securities that can be sold, government funds, and quick mortgage and asset-backed securities. Read on to discover everything there is to know about characteristics of indian money market and to become a subject matter expert on it.

On the money markets, things that can’t wait in the budget are taken care of. The money market specialises in one-year mortgages. Since all short-term securities are now considered commodities, the money market is the part of the financial market that deals with lending, buying, and selling loans with terms of a year or less.

Top 15 – Characteristics of Indian Money Market

These are the Reserve Bank of India (RBI), the Development Finance Holdings Inc. (DFHI), mutual funds, banks, corporate investors, non-bank financial companies (NBFCs), state governments, provident funds, and primary dealers. Companies that are not STCI, not Indian, not PSU, and not foreign. We will go over the characteristics of indian money market in detail in this article. Stay informed by reading more about features of Indian money market.

Absence of Integration

However, this is a big change for the financial system in India as there are a lot of different parts that don’t always go together, and these parts of the money market don’t work together well. It’s important to note that RBI is in charge of the organised sector alone.

Central Bank Presence

In times of emergency, the central bank might use the cash on hand to discount eligible securities. By doing things on the open market, the central bank can take in seasonal extra money and get working capital during busy times.


Different parts make up India’s financial system. Kolkata and Mumbai are the two most important places for business in India. There are two major money markets in the United States. Delhi and Ahmedabad are now part of the National Money Market. Both the economy and the stock market have parts that are local and parts that are national.

Role of Market

Furthermore, central banks, non-banking financial companies, discount houses, and acceptance houses also play important roles in the money markets. However, it is worth noting that commercial banks are the dominant institutions in this area.

Unorganized Sector

Third, most of the rules for the shadow banking system come from the central banking system. Because the money market is not regulated, the RBI can’t use its fiscal discretion as much as it could.

When they don’t have enough money, these businesses don’t count on help from the RBI. Reserves are not only unnecessary, but they are also unnecessary. But RBI’s tools for controlling credit can’t be used against them, even if they should be punished to protect the national interest.

No Formal Place

It’s common to do business over the phone. After the fact, you should write to each other and trade any important papers. The only thing that comes close to a stock market is a capital market.


The market has a lot of different things. Smaller markets for different kinds of loans break it up. Money, acceptance, and bills on the market

Split into Two Distinct Parts

The money market is mostly made up of commercial banks. They are the main way to get cash quickly. Commercial banks connect the Central Bank to the money market.

Lack of Organized Bill Market

In India, trading bills is not a common thing to do. In 1952 and 1970, the Reserve Bank of India (RBI) tried to organise India’s bill market with the New Bill Market Scheme, but neither time was successful.

Money Supply Seasonality

Lastly, the Indian money market is defined by the fact that the supply of money is limited during times of high demand. Interest rates tend to go up between November and June, when demand is at its highest. During the off season, interest rates are often low.

Seasonal changes in interest rates cause uncertainty in the money markets. In its role as the country’s financial watchdog, the Reserve Bank of India (RBI) has a good handle on market interest rate swings.

Structured Banking System

To start, there has always been a clear divide in India’s monetary system between commercial banks based in the West and those that use more traditional models. There is a weak link between these two areas, but there is one.

Each area has its own set of rules. The shadow banking system in India has been getting smaller and smaller over time. Its role in rural finance is becoming more and more important.

Lack of Bank Discipline

India’s banking system is also not well put together. Commercial banks keep extra money in their reserves. Their rules are stricter than those of the informal lending industry. Institutions are hesitant to open branches in areas where there are no banks.

It’s not fair to expect so much from commercial banks. The Indian banking system is strong, particularly after the government took it over. This method is widely used in the financial world right now. People have questioned the way the RBI regulates traditional banks.

Call Money Market Volatility

Money on call is cash you can use right away. The standard call-rate fees are what you should pay. Commercial banks need call money to do their jobs. GICs, LICs, etc. are hard to predict because there are so many ways they could turn out.

RBI and Unorganized Segments

The central bank is in charge of a country’s monetary policy. Some of the things that affect how well monetary policy works can be found on the money market. The LDCs have a weak financial system. India is in the same situation. Since the general public can’t put money into the banks, they don’t need a bailout from the Reserve Bank of India.

The Reserve Bank of India does not watch over these parts of the financial market. The RBI will always be in charge of regulating and guiding the organised money market. The RBI can’t change either the quality or the makeup of credit on the unorganised money market.

In turn, this makes RBI’s money policy and credit control less effective. The Reserve Bank of India (RBI) uses credit limitation sometimes to keep inflation in check (or deflation). The Reserve Bank of India sets banking rules.

But this doesn’t apply to bankers from their own country. So, it becomes harder to control how much prices go up or down. These businesses make a lot of illegal money every year. They are hard to control in what they do.

No Bill Market Before 1971

Moreover, without a bill market to facilitate the exchange of trade bills between the formal and informal financial sectors, the integration of these markets would be challenging. Unfortunately, in 1970, India lacked a “true” bill market system.

Frequently Asked Questions

Who Controls the Indian Money Market?

The Payment and Settlement Systems Act of 2007 and the Payment and Settlement Systems Act of 2007 regulate the financial markets, along with the Foreign Exchange Management Act of 1999, the Bilateral Netting of Qualified Financial Contracts Act of 2020, and the Reserve Bank of India Act of 1934.

Who are the Major Players in the Indian Money Market?

The Reserve Bank of India, all commercial banks, NBFCs, LIC, Mutual Funds, large businesses, and state governments are all important players in the market. We need to look at the market from different angles.

When did the Money Market Start in India?

In April 1991, the Indian government set up money market mutual funds so that investors could choose from a wider range of short-term investments (MMMFs).


Since then, the Reserve Bank of India (RBI) has been in charge of keeping the money system in order. India has a market for bills. This reduces the number of unregulated financial institutions. The need for this industry is still very important. There must be a coming together. In this post, we’ll examine the characteristics of indian money market and grab extensive knowledge on the topics.

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