Top 10 – Features of Indian Money Market

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

Short-term investments in the production process make up the first type of funding. The “money market” is the second market for short-term loans and borrowing in the financial sector. Every institution in the global monetary system, whether it’s a bank, a business, a corporation, or even the government, has a hard time staying liquid because its spending and payments rarely happen at the same time. Check out these features of indian money market to enhance your knowledge.

The money market provides a platform for making short-term investments. We call something short-term if it lasts for less than or the same as 364 days. The borrower completes the borrowing and repayment within 364 calendar days or less. The manufacturing sector needs both capital to run and capital to invest. Companies use operating capital to pay for expenses such as raw materials and labor, whereas they use investment capital to pay for items such as machinery and pollution control systems. To expand your understanding, read differences between money market and capital market beyond what is offered at face value.

Top 10 – Features of Indian Money Market

Participants buy and sell short-term loans and borrowings in the money market. The money market is a way for large amounts of money to move from one financial institution to another. It is also a way for corporations and other institutions with a lot of cash on hand to lend their extra money to other financial institutions that need short-term funding (albeit at a cost). We’ll look at the features of indian money market and talk about the related topics in this area.

Geographical Constraints

The location does not limit the money market, unlike stock exchanges. A large area can accommodate the dispersion of monetary asset trading institutions. There are many financial centres, such as Mumbai, Calcutta, Chennai, etc., but they are not separate markets. Instead, they are all linked to each other and depend on each other.

Dichotomic Structure

There are both organised and unorganised money markets in the Indian market. Both of these kinds of money markets are part of the Indian market. The Reserve Bank of India (RBI), all scheduled commercial banks, and many other authorised financial companies make up India’s organised money market. Local money lenders, local bankers, traders, and so on make up the unorganized part of the money market, on the other hand.

Presence of Central Bank

Various financial institutions have granted substantial power to the Reserve Bank of India. It has these rights because the government gave them to it. But the Indian banking system has never been directly controlled by the RBI because it has always been run separately from it. Since the rates of interest in the organised sector are much lower, the unorganised sector has to make up for it by charging much higher rates.

The Central Bank of the country controls the flow of money to make sure it meets the needs of the economy. In times of crisis, the other member banks will still be able to borrow from the Central Bank. We need a strong Central Bank to manage, regulate, and steer the country’s currency because of this.

Put out more information… For more on the lack of a regulated bill market, see br /> India’s money system does not have a bill market that works well. With the Bill Market Scheme (1952) and the New Bill Market Scheme (1970), the Reserve Bank of India (RBI) tried to set up a controlled bill market in India. However, neither of these plans ever took off.

Multiplicity of Interest Rates

There are many different interest rates on the Indian money market. There is a wide range of rates because they depend on the borrower, the financial institution, and the time. Again, the interest rates are different for the structured and unstructured parts. Because of this, interest rates on the Indian money market change a lot. a business banking system that has been around for less time.

Most short-term funding comes from commercial banks. Local bankers run each bank in their own way, and India has many such banks. They are nothing that RBI can do anything about. Changes in call rates cause significant changes in the call money market, which institutions such as scheduled commercial banks, co-operative banks, and primary dealers use.


The formal “organised” sector and the informal “unorganised” sector make up India’s money market. The two groups don’t work together or talk to each other very much. Because of this, the interest rates that different markets offer are very different.

Inter-Call Money and Securities

The inter-bank call money market holds together the Indian money system. In this sector, the money market is at its most volatile. The Indian government or a state-run financial institution creates most of the money market securities that people own. Most people choose these investments because they give the best returns.

Variety of Financial Institutions

There are many different kinds of financial organisations in the Indian market, such as cooperative banks, Export-Import banks, and non-banking financial intermediaries. They help solve the money problems that many parts of the economy face.

Lack of Foreign Acceptance

The Indian money market lacks banks and discount houses. This is because India’s bill market isn’t as sophisticated as those in other countries. India’s market is not connected to the rest of the world like other major financial hubs are. The Indian Money Market doesn’t talk much with other markets around the world.

Seasonal Variations

The busy season and the slow season require varying amounts of money during the year. Between November and April, when most crops are picked and taken to market, is the busiest time of the year. Right now, people need money more than ever. May through October is the slow season. As people are paying back money, the need for new money is decreasing.

High Volatility 

The marketplace for short-term loans is called the “call money market.” At this time, one must pay the call rate. Commercial banks are the main people who want to use call money. hanges in call rates cause significant changes in the call money market, which institutions such as scheduled commercial banks, co-operative banks, and primary dealers use. Due to these gaps in liquidity, the market has stayed very unstable.

Frequently Asked Questions

Is the Money Market in India Well Developed?

What happens in the financial markets directly links to the growth of the Indian economy. Even though they are not as well-known as the money markets in the U.S. and London. Here, RBI-approved market players can borrow and lend money for short amounts of time.

What are the Important Segments of Indian Money Market?

The most important parts of India’s money market are call money, short-notice money, and Treasury Bills. Most of these funds fall into two main groups: call money and short-notice money. Primary dealers (PDs), which include banks and other financial institutions, are very important in many parts of the money market.

In which Category is Indian Money Market Kept?

There are two main parts to the Indian financial market: the organised sector and the unorganised sector. The government, the Reserve Bank of India (RBI), commercial banks, rural banks, and international financial institutions are all involved in this area. This group is called the “Organized Sector.” The RBI has regulated and organized this business.


The speed of change sped up because of how rigid the financial system was. In response to suggestions from an Internal Working Group in 1997, the Vaghul Committee in 1987, and the Narsimhan Committee in 1998, the Reserve Bank of India (RBI) made a whole set of rules to improve the Indian money market. This article will go into features of Indian money market in detail and provide some examples for your convenience.

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