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Unit V
- 1. N.DHINAKARAN ASSISTANT PROFESSOR OF ECONOMICS VIVEKANANDA COLLEGE TIRUVEDAKAM WEST MADURAI Course Title : Money and Banking Course Code: 01CT31
- 2. Money Market • Money market is the mechanism through which short term funds are loaned and borrowed. It designates financial instittutions which handle the purchase, sale and transfer of short term credit instruments. Commercial banks, acceptance houses, Non Banking Financial Institutions and the Central Bank are the institutions catering to the requirements of short term funds in the money Market.
- 3. INSTITUTIONS OF THE MONEY MARKET •Central Bank •Commercial Banks •Non – Bank Financial Intermediaries
- 4. Instruments of the Money Market • Promissory Note • Bill of Exchange or Commercial Paper • Treasury bill • Call and Notice Money • Certificate Deposits • Commercial Papers
- 5. Functions of a Money Market • Provides Funds • Use of surplus funds • No need to borrow from banks • Helps governments • Helps in Monetary policy • Helps in Financial Mobility • Promotes Liquidity and safety • Equilibrium between Demand and supply of funds • Economy in Use of Cash
- 6. Characteristics of an Undeveloped Money Market • Personal Touch • Flexibility in loans • Multiplicity of Lending Activities • Varied interest Rates • Defective system of Accounting • Absence of Link with Developed Money Market
- 7. Characteristics of an Developmental Money Market • Central Bank • Organizing Banking System • Specialized Sub – Markets • Existence of larger near – money assets • Adequate financial Resources • Remittance facilities • Miscellaneous
- 8. Capital Market: Capital Market is a part of financial system which is concerned with raising capital by dealing in shares, bonds and other long term investments. The market where investment instruments like bonds, equities and mortgages are traded is known as the capital market
- 9. Differentiate between Money Market and Capital Market
- 10. Monetary Policy • Monetary policy refers to the policy of the central bank – ie Reserve Bank of India – in matters of interest rates, money supply and availability of credit.
- 11. Objectives of Monetary Policy Neutrality of Money: Exchange Rate Stability: Price Stability: Full Employment Economic growth: Equilibrium in the Balance of Payments Equilibrium:
- 12. Types of Monetary Policy:
- 13. Types of Monetary Policy:
- 14. Instruments of Monetary Policy: