indian money market

20
INDIAN MONEY INDIAN MONEY MARKET MARKET SUBHADEEP MIUKHOPADHYAY SUBHADEEP MIUKHOPADHYAY NALSAR, ML-FS&CM COURSE NALSAR, ML-FS&CM COURSE

Upload: subhabkp

Post on 17-Nov-2014

734 views

Category:

Documents


2 download

DESCRIPTION

this a complete presentation on indian money market.hope some body may get some help or can gather some knowledge from my work..

TRANSCRIPT

Page 1: Indian Money Market

INDIAN MONEY INDIAN MONEY MARKETMARKET

SUBHADEEP MIUKHOPADHYAYSUBHADEEP MIUKHOPADHYAYNALSAR, ML-FS&CM COURSENALSAR, ML-FS&CM COURSE

Page 2: Indian Money Market

CONTENTSCONTENTS What is Money MarketWhat is Money Market Features of Money MarketFeatures of Money Market Objective of Money MarketObjective of Money Market Financial sector reformsFinancial sector reforms Instrument of Money MarketInstrument of Money Market Primary DealersPrimary Dealers ConclusionConclusion

Page 3: Indian Money Market

1! WHAT IS MONEY 1! WHAT IS MONEY MARKET?MARKET?

As per RBI definitions “ A market for short As per RBI definitions “ A market for short terms financial assets that are close terms financial assets that are close substitute for money, facilitates the substitute for money, facilitates the exchange of money in primary and exchange of money in primary and secondary market”.secondary market”.

The money market is a mechanism that The money market is a mechanism that deals with the lending and borrowing of deals with the lending and borrowing of short term funds (less than one year). short term funds (less than one year).

A segment of the financial market in which A segment of the financial market in which financial instruments with high liquidity and financial instruments with high liquidity and very short maturities are traded.very short maturities are traded.

Page 4: Indian Money Market

Continued…….Continued…….

It doesn’t actually deal in cash or It doesn’t actually deal in cash or money but deals with substitute of money but deals with substitute of cash like trade bills, promissory notes cash like trade bills, promissory notes & govt papers which can converted & govt papers which can converted into cash without any loss at low into cash without any loss at low transaction cost.transaction cost.

It includes financial institutions and It includes financial institutions and intermediaries.intermediaries.

Page 5: Indian Money Market

2 ! FEATURES OF MONEY 2 ! FEATURES OF MONEY MARKET?MARKET?

It is a market purely for short-terms funds or It is a market purely for short-terms funds or financial assets called near money.financial assets called near money.

It deals with financial assets having a It deals with financial assets having a maturity period less than one year only.maturity period less than one year only.

In Money Market transaction can not take In Money Market transaction can not take place formal like stock exchange, only place formal like stock exchange, only through oral communication, relevant through oral communication, relevant document and written communication document and written communication transaction can be done. transaction can be done.

Page 6: Indian Money Market

Continued……..Continued……..

Transaction have to be conducted without Transaction have to be conducted without the help of brokers.the help of brokers.

It is not a single homogeneous market, it It is not a single homogeneous market, it comprises of several submarket like call comprises of several submarket like call money market, acceptance & bill market.money market, acceptance & bill market.

The component of Money Market are the The component of Money Market are the commercial banks, acceptance houses & commercial banks, acceptance houses & NBFC (Non-banking financial companies). NBFC (Non-banking financial companies).

Page 7: Indian Money Market

3 ! OBJECTIVE OF MONEY 3 ! OBJECTIVE OF MONEY MARKET?MARKET?

To provide room for overcoming short term To provide room for overcoming short term deficits.deficits.

To enable the central bank to influence and To enable the central bank to influence and regulate liquidity in the economy through regulate liquidity in the economy through its intervention in this market.its intervention in this market.

To provide a reasonable access to users of To provide a reasonable access to users of short-term funds to meet their requirement short-term funds to meet their requirement quickly, adequately at reasonable cost.quickly, adequately at reasonable cost.

Page 8: Indian Money Market

4 ! FINANCIAL SECTOR 4 ! FINANCIAL SECTOR REFORMS REFORMS

o Object of financial sector reforms by Object of financial sector reforms by Government of India & RBI.Government of India & RBI.

o Condition of money market before Condition of money market before Pre reform period (Before 1991)Pre reform period (Before 1991)

o Sukkmoy Chakravarthi Sukkmoy Chakravarthi Committee( 1985)Committee( 1985)

o Vaghul Committee( 1985-91)Vaghul Committee( 1985-91)

Page 9: Indian Money Market

MONEY MARKET MONEY MARKET INSTRUMENTS [Sec. 45U(b)]INSTRUMENTS [Sec. 45U(b)]

Treasury bills Treasury bills Certificate of deposit. Certificate of deposit. Commercial papers.Commercial papers. Money at call and short notice in the call Money at call and short notice in the call

loan market.loan market. Inter-bank term moneyInter-bank term money Repo instrumentRepo instrument Banker's AcceptanceBanker's Acceptance

Page 10: Indian Money Market

Treasury Bills (T-Bills)Treasury Bills (T-Bills)

(T-bills) are the most marketable money (T-bills) are the most marketable money market security. market security.

They are issued with three-month, six-They are issued with three-month, six-month and one-year maturities. month and one-year maturities.

T-bills are purchased for a price that is less T-bills are purchased for a price that is less than their par(face) value; when they than their par(face) value; when they mature, the government pays the mature, the government pays the holder the full par value.holder the full par value.

T-Bills are so popular among money T-Bills are so popular among money market instruments because of market instruments because of affordability to the individual investors. affordability to the individual investors.

Page 11: Indian Money Market

Certificate of deposit (CD)Certificate of deposit (CD)

A CD is a time deposit with a bank.A CD is a time deposit with a bank. Like most time deposit, funds can not Like most time deposit, funds can not

withdrawn before maturity without withdrawn before maturity without paying a penalty.paying a penalty.

CD’s have specific maturity date, CD’s have specific maturity date, interest rate and it can be issued in any interest rate and it can be issued in any denomination.denomination.

The main advantage of CD is their The main advantage of CD is their safety.safety.

Anyone can earn more than a saving Anyone can earn more than a saving account interest.account interest.

Page 12: Indian Money Market

Commercial paper (CP)Commercial paper (CP)

CP is a short term unsecured loan issued CP is a short term unsecured loan issued by a corporation typically financing day to by a corporation typically financing day to day operation.day operation.

CP is very safe investment because the CP is very safe investment because the financial situation of a company can easily financial situation of a company can easily be predicted over a few months.be predicted over a few months.

Only company with high credit rating Only company with high credit rating issues CP’s.issues CP’s.

Page 13: Indian Money Market

Repurchase agreement (Repos)Repurchase agreement (Repos)

Repo is a form of overnight borrowing and Repo is a form of overnight borrowing and is used by those who deal in government is used by those who deal in government securities.securities.

They are usually very short term They are usually very short term repurchases agreement, from overnight to repurchases agreement, from overnight to 30 days of more.30 days of more.

The short term maturity and government The short term maturity and government backing usually mean that Repos provide backing usually mean that Repos provide lenders with extreamly low risk.lenders with extreamly low risk.

Repos are safe collateral for loans.Repos are safe collateral for loans.

Page 14: Indian Money Market

Call Money/Notice moneyCall Money/Notice money

The call/notice money market forms The call/notice money market forms an important segment of the Indian an important segment of the Indian money market. Under call money money market. Under call money market, funds are transacted on market, funds are transacted on overnight basis and under notice overnight basis and under notice money market, funds are transacted money market, funds are transacted for the period between 2 days and 14 for the period between 2 days and 14 daysdays

Page 15: Indian Money Market

Banker's AcceptanceBanker's Acceptance

A banker’s acceptance (BA) is a short-term A banker’s acceptance (BA) is a short-term credit investment created by a non-financial credit investment created by a non-financial firm.firm.

BA’s are guaranteed by a bank to make BA’s are guaranteed by a bank to make payment.payment.

Acceptances are traded at discounts from Acceptances are traded at discounts from face value in the secondary market.face value in the secondary market.

BA acts as a negotiable time draft for BA acts as a negotiable time draft for financing imports, exports or other financing imports, exports or other transactions in goods.transactions in goods.

This is especially useful when the credit This is especially useful when the credit worthiness of a foreign trade partner is worthiness of a foreign trade partner is unknown. unknown.

Page 16: Indian Money Market

Inter-bank term money Inter-bank term money

Inter- bank market for deposits of maturity Inter- bank market for deposits of maturity beyond 14 days is referred to as the term beyond 14 days is referred to as the term money market. The entry restriction are the money market. The entry restriction are the same as those for call/notice money except same as those for call/notice money except that, as per existing regulations, the specifies that, as per existing regulations, the specifies entities are not allowed to lend beyond 14 days.entities are not allowed to lend beyond 14 days.

Page 17: Indian Money Market

6! PRIMARY DEALERS6! PRIMARY DEALERS

In march 1995 the RBI announced In march 1995 the RBI announced guidelines for setting up of primary dealers guidelines for setting up of primary dealers (PD).(PD).

STCI (SECURITIES TRADING CORPORATION STCI (SECURITIES TRADING CORPORATION OF INDIA LTD).OF INDIA LTD).

SBI DFHISBI DFHI

Page 18: Indian Money Market

7! FOREX TRADING 7! FOREX TRADING

Forex is the most important factor for any country. Forex is the most important factor for any country. Forex reserve determines the status of the country. Forex reserve determines the status of the country. Forex or FX is the most important asset today. It is Forex or FX is the most important asset today. It is one of the greatest opportunities to make money. one of the greatest opportunities to make money.

Forex Trading means trading in the currencies. In Forex Trading means trading in the currencies. In the FX market one currency is traded or the FX market one currency is traded or exchanged with another currency. One of the exchanged with another currency. One of the unique factors of the forex market is the volume of unique factors of the forex market is the volume of the trade that happens in the forex market. the trade that happens in the forex market. According to the latest estimates more than 4 According to the latest estimates more than 4 trillion US dollar per day.trillion US dollar per day.

Page 19: Indian Money Market

8 ! Conclusion8 ! Conclusion

Lastly concluded that the Indian money market Lastly concluded that the Indian money market plays a vital role in the Indian financial system. It plays a vital role in the Indian financial system. It is a short term market where the liquidity is very is a short term market where the liquidity is very high. The government securities are traded in a high. The government securities are traded in a short term period. It mobilizing the financial short term period. It mobilizing the financial assets in the various sectors and traded by the assets in the various sectors and traded by the banks and other financial intermediaries. This banks and other financial intermediaries. This market regulates by the primary dealers where market regulates by the primary dealers where the STCI & SBIDFHI plays a pivotal role. These the STCI & SBIDFHI plays a pivotal role. These institution regulates the market. So this market is institution regulates the market. So this market is very much needed for the financial institutions to very much needed for the financial institutions to meet the need of short term debt in the market.meet the need of short term debt in the market.

Page 20: Indian Money Market

Thank youThank you