Question 2

“Money Market is essentially a Market for short term funds.” Discuss.


Money market is a market where transactions are made in short-term securities or it is meant for those securities where the payment period is upto one year. Since, their maturity period is very short, they are also termed as near money. These securities include call money, treasury bills, commercial bills, certificate of deposit, commercial paper, etc. Short-term financial instruments satisfy the requirement of short-term or working capital needs of commercial establishments.

Features of Money Market are:

  1. The volume of transaction in money market is large that is why it is also called Wholesale market.
  2. The participants of money market are RBI, commercial banks, financial institutions and finance companies.
  3. Impersonal relationship is established among the participants in a money market.
  4. Money markets are highly liquid and have an arrangement for providing liquidity, which is provided by Discount and Finance Houses of India (DFHI).

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