In case of a developed money market, there is no need to borrow money from commercial and central bank. They include commercial banks as well as large non-financial corporations, states and other local governments. Money market instruments provide opportunity to the banks and financial institutions to use their surplus funds profitably for a small period of time. Therefore, the money market instruments, in turn, can help the development of trade, industry and commerce within and outside the country. These funds are provided by discounting the trade bills through commercial banks, brokers, discount houses, and acceptance houses. The Money Market Instruments help to provide short-term funds to the private and public institutions who need finance for their working capital requirements. But, the money market transactions can’t be done through brokers as they have to be carried out via mediums like formal documentation, oral or written communication. Besides, the money market deals are not out in money / cash, but other instruments like trade bills, government papers, promissory notes, etc. Money market is a part of a larger financial market which consists of numerous smaller sub-markets like bill market, acceptance market, call money market, etc. ![]() The non-banking finance corporations (NBFCs), commercial banks, and acceptance houses are the components which make up the money market. High liquidity and short maturity are typical features which are traded in the money market. In other words, the money market is a mechanism which facilitate the lending and borrowing of instruments which are generally for a duration of less than a year. The assets are a close substitute for money and support money exchange carried out in the primary and secondary market. As per the Reserve Bank of India, the term ‘Money Market’ is used to define a market where short-term financial assets with a maturity up to one year are traded.
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