Structure of Indian Money Market

Structure of Indian Money Market-What is Indian Money Market Structure-What is the Main Structure of a Indian Money Market

Market participants buy and sell short-term, liquid financial instruments on the money market. Market participants trade short-term debt instruments such as Treasury Bills and commercial paper on the money market. The wholesale money market is for business-to-business deals. Members can use it to both borrow and lend money in the short term. In this post, we’ll examine the structure of indian money market and grab extensive knowledge on the topics.

Economies usually have a lot of different kinds of markets. Investors make and trade assets in financial markets. The capital market and the money market are the parts of this economic system. Find out how the money markets work.

Structure of Indian Money Market

Geoffrey says that the “money market” is all the places where different kinds of “near money” are traded. Read on to discover everything there is to know about structure of indian money market and to become a subject matter expert on it. Read more about best business to start with little money to deepen your comprehension.

Certificate of Deposit (CDs)

They made the first one of these in 1989, and you can trade them on the money market. Since 1993, the RBI has given IFCI, IDBI, IRBI (now IIBI) and the Exim Bank permission to sell CDs with terms of one to three years. Commercial banks and development banks both give out certificates of deposit, which are unsecured and can be sold. (This sentence is already in the active voice.)

Additionally, Certificates of Deposit (CDs) are bank deposits with a fixed interest rate that can be bought and sold. These assets on the money market are safe and easy to trade. India made CDs to help commercial banks in the country get market financing, which is an interesting fact.

Chit Funds

Where you can put your money The members give money regularly. A member gets these payments based on a set of rules (by bids or by draws). The Indian states of Kerala and Tamil Nadu are where chit funds are most well-known.

Treasury Bills

Since the country became independent in 1986, they set up this type of money market instrument for the first time. The Central Government puts them out every 364 days to meet its short-term cash needs. The government will only give out TBs that are good for 91, 182, or 364 days. TBs not only meet the CRR and SLR requirements, but they also act as a short-term buffer for the government and give financial institutions opportunities to make short-term investments.

On the secondary market, U.S. Investors buy and sell Treasury Bills. Commercial banks, primary dealers, mutual fund companies, corporations, financial institutions, pension funds, and insurance companies all buy and sell Treasury Bills.

Cash Management Bill (CMB)

They have been using this since August 2009 to make up for gaps in the government budget. They do not have standard management of Cash Bills that are due in less than 91 days, and they discount them. Investors can buy and sell CMBs like Treasury Bills, and they receive them at a discount to their face value. Banks can put their SLR investments there and do well.

Money Lenders

The village moneylender is the main place where people can get credit, but interest rates are too high. As a result, workers in the agricultural sector, the artisan community, the service sector, the manufacturing sector, etc. all get loans that don’t help them make a living. However, there are fast, helpful, and able to change alternatives available.

Finance Brokers

You can find them in the fabric, grain, and commodity markets of every big city. People who help with money.

Call Money Market (CMM)

The overnight borrowing market, also called “money at call,” is a type of inter-bank money market that helps banks lend and borrow money for just one day. There is a 14-day limit on getting loans or raising money (called short notice). This is a type of Indian money market.

Here, you can borrow money without having to put up any collateral. The repo rate changes with the interest rate on the market. LIC, GIC, Mutual Funds, IDBI, and NABARD can only lend money, but Scheduled Commercial Banks and Co-operative Banks can both borrow and lend money.

Unorganized Sector

The unorganized money market is not run by anyone in charge and works all by itself. People and businesses like payday lenders, Indigenous bankers, retailers, landlords, Meghans, chukars, nights, chit funds, and many more run the unregulated money market.

However, Indian bankers, money lenders, and non-banking financial intermediaries who are not regulated usually take part in the money market. They mainly work in more rural areas and bring in 36% of the money that rural households get.

Money Market Mutual Funds

Since 1992, investors have been able to buy mutual funds (MFs), which are a type of money market product. SEBI and the RBI have been in charge of MFs since March 2000. At the moment, commercial banks, government and private financial organizations, and private sector corporations can all set up funds (MFs).

Commercial Papers (CPs)

Indian companies have been using it since at least 1990. CP issuers must get credit ratings from organizations that the Reserve Bank of India recognises (such as CRISIL, ICRA, etc). Commercial paper is a type of promissory note that is not backed by anything and is very liquid. It does not exist in physical form.

At the end of the term, the buyer gets a certain amount. Manufacturing and banking companies, both public and private, with a good reputation are most likely to issue commercial papers. We don’t give them enough credit.

Organised Sector

The Reserve Bank of India is in charge of the organized markets in India. This business has been around for a while, and it is run by people who know a lot about it.

Commercial Bill(CB)

As of 1990, Scheduled Commercial Banks, Merchant Banks, Co-operative Banks, Mutual Funds, and AIFIs could all issue CBs. It replaced the national Bill Market in 1952. Sellers write commercial bills to buyers in exchange for goods or services. They can trade themselves and pay for themselves.

Banks will only take legitimate trade bills or bills of exchange from businesses. People often pay bills after the due date, with the maturity period usually lasting up to 90 days. During this time, stores can get discounts on their bills from banks. Commercial banks can re-discount these invoices with EXIM, SIDBI, IDBI, etc. Because of this, commercial bills are necessary for short-term financing of trade and business.

Repos and Reverse Repos

The Reserve Bank of India (RBI) has a short-term loan programme called “Repo.” This lets banks and other financial institutions borrow money quickly (by selling government securities to the RBI). The Reserve Bank of India sells banks government bonds through a process called reverse repo (basically here the RBI is borrowing from the banks and the financial institutions). Recently, these tools have become important in the way they run monetary and credit policy of money market.

Indigenous Bankers

These exchanges work like banks because they take deposits, give loans, and trade “hundis” (The hundi is a short-term indigenous bill of exchange). Bank and market interest rates are unstable. It is also possible for them to pay for it themselves. Some famous Indian families with names that start with “K” are the Kathakalis, Sarafs, Shroffs, Chettys, and so on. Their lending services help businesses, factories, and farms all over the world.

Native American financial institutions have a reputation for being easy to use, flexible, casual, personalized, quick, and making money available. Even though they might be interested in non-banking businesses like general merchants, brokers, etc., they face problems like high interest rates (18%–36%) and a focus on banking rather than commerce. The RBI set up money market mutual funds so that small investors could get into the money market. This is why money market mutual funds only hold securities that are due to be paid off within a year.


Mutual funds give money to people who need it by using deposits that members make to give loans for home repairs and improvements. However, only in South India can you find them. Regulators do not check Nidhis and chit funds in India, which is a big problem.

Frequently Asked Questions

Which Organization Controls the Indian Money Market?

Financial markets are controlled by the Payment and Settlement Systems Act of 2007 and the Payment and Settlement Systems Act of 2007, as well as 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.

What is the Structure of the Money Market in India?

There are both formal and unofficial institutions in the Indian financial market. The Reserve Bank of India (RBI), commercial banks, rural banks, and foreign banks are all part of the “Organized Sector.”

What are the Objectives of Indian Money Market?

Moreover, the money markets are responsible for monetary policy at the national level. The goal of monetary policy is to grow the economy, make things more fair, and keep prices stable. In fact, in the first ten years of planning, one of the top priorities was to bring back tried-and-true ways of managing money.


The fact that the money market is always changing has a big impact on our daily lives. Players in the short-term money market need to be aware of changes, well-informed, and creative. The structure of indian money market will be covered in-depth in this article, along with some examples for your convenience.

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