Characteristics of Indian Money Market

What are Indian Money Market Characteristics-Frequently Asked Questions-Characteristics of Indian Money Market

The desire for money market and the tax increase market are two examples of submarkets. The Reserve Bank of India (RBI) and commercial banks in India use the money market as a kind of middle man when it comes to monetary policy and management. Check out these characteristics of indian money market to broaden your horizons.

A stock exchange can only find in one place, but a money market can find anywhere in the world. Even though there are a number of financial centers, such as Mumbai, Calcutta, and Chennai, these cities do not have separate markets; instead, they depend on and help each other. Stay informed by reading more to learn more about the advantages of money market account subject.

Characteristics of Indian Money Market

The financial market of a country is where people buy and sell financial assets and tools like its currency, bank deposits, bills, bonds, and other similar investments. A financial market make up of many smaller markets, such as the money market and the stock market. For your research and knowledge purposes, below is a list of characteristics of indian money market.

Banking Self-Control

India does not have a simple financial system, which gets us to our fourth point. As a normal way of doing business, private banks usually stick to the practice of keeping an extra cash reserve. If you compare their lending standards to those of the unorganized part of the market, you might think they are very strict. Communities that don’t have banks or don’t have enough of them take a long time to get branches of big banks.

On the other hand, there is no reason to criticize private banks at the moment. Since the government took over the banks in India, they have gotten better to the point where they are now thought to be strong enough. There are now rules about this part of the stock market. There is a lot of proof that the RBI’s oversight of the organized commercial banking system is not as good as it says it is.

Lack of Cohesion

This is a very important part of the Indian banking system. It is broken up into a lot of different parts that don’t connect to each other very well. At the moment, the different parts of the money market are not working together all that well. The Reserve Bank of India (RBI) has full control over the parts used in the organized sector, but it has no control at all over the parts used in the unregulated sector.

Billing Flexibility

The market for invoices isn’t very big on the Indian banking market. Even though the Reserve Bank of India (RBI) created the Bill Market Scheme in 1952 and the New Bill Market Scheme in 1970, the Indian bill market is still not well managed.

Market Alert

On the call money market, people give money for short periods of time. In this particular case, you have to pay the usual rate. Most of the time, businesses are the ones who ask for call money. Because of the big changes that institutions like the GIC, LIC, and others have seen, it has been very unstable.

Gov Bank Active

The currency reserves of these countries are kept by their central banks, which also help out in times of trouble by giving discounts on their qualified securities. By using open market activities, the central bank can take in seasonal cash flow surpluses and add to the amount of money in circulation.


The second problem that needs to fixe is that India’s financial industry break up. The two most important places for business in India are Kolkata and Mumbai. The National Money Market is what these two markets call when they work together. Even so, both Delhi and Ahmedabad will soon become part of the National Money Market. It is possible to link the national money markets to the many area financial hubs.

Bills’ market 1971

Fifth, the combination of controlled and unregulated parts of the money market can’t happen until there is a market for bills. People have said that trade invoices that can negotiate easily are a requirement for the two companies to connect or merge. Before the Reserve Bank of India (RBI) started a plan to set up a “real” bill market in 1971, India had never seen anything even remotely like this.


First, the Indian money market usually split in two. One side follows the model of commercial banking in the West or Europe, while the other side sticks to more traditional business practices. This difference is because the Indian economy has always been affected by Western and European business banking models. The link between these two markets isn’t very stable, though.

The private sector, the nonprofit sector, and the state sector all have their own ways of doing things. In recent years, the unregulated part of the Indian money market has been getting less and less important. Even so, it is an important part of how financial services bring to rural places.

Bank Efficiency

The way the market works in business institutions is similar to how the central nerve system works. Most people use them when they need money quickly. Commercial banks are an important part of the money market because they link the Central Bank to the rest of it.

RBI and Shadows

The central bank should be in charge of the economy of a country and make the final choice. The money market of a country is one of the most important things that determines how well its monetary policy will work. Most LDCs have banking sectors that aren’t as good as they could be. India is by no means the only example of this. India’s banking system and other unregulated parts of the country’s money market do not need help from the Reserve Bank of India (RBI) because they handle their own cash and do not take payments from the general public.

It is not fair to expect the Reserve Bank of India, also known as the RBI, to handle or direct these money market parts. But the RBI must keep an eye on and guide the parts of the money market that controll. The RBI controls the parts of the money market that set up, but not the parts that aren’t.

This makes it harder for the RBI’s monetary policy and the tools it uses to limit credit to work. The Reserve Bank of India (RBI) will sometimes use credit control methods to fight against inflation (or deflation). To tell the truth, the regulatory processes set up by the RBI have a tight grip on private banks.

But these rules do not apply to native financiers, and they are not forced to follow them. This makes it harder to keep prices from going up or down, depending on the situation. Also, these businesses are very important to the economy because they help money move around without being tracked. Still, they are not being watched for the vast majority of what they do.


You can’t look at the market as one thing. There are many different types of markets, and each one focuses on a different kind of banking. Some of these are the Bill Market, the Acceptance Market, and the Call Money Market. This is good characteristics of indian money market.

Money Flux

Even though the desire for money is at an all-time high, there is very little money available on the Indian money market during its peak season. Most of the time, a rise in interest rates happens between November and June because more people want flexible money and there isn’t enough to go around. Post-season brings lower interest rates, contrary to the seasonal uptrend, signaling a reversal in financial dynamics.

The money market is full of unpredictability because interest rates change from time to time. RBI, India’s monetary regulator, ensures market stability by managing interest rate fluctuations, maintaining financial equilibrium, and fostering economic growth.

RBI’s Limited Influence

Third, there isn’t a big link between the shadow section of the money market and the way the central bank regulates things. The RBI faces limitations in controlling money due to a disorganized market, hindering its desired flexibility and authority.

This is because these groups do not need financial help from the RBI during times of liquidity crisis. Also, they don’t have to keep any money in stock. RBI can’t currently use credit control tools on them, despite the potential national interest in their punishment. This is true no matter what the RBI thinks about whether or not the penalty is fair.

Location Found

Usually, deals do over the phone or by talking. Future communication involves conversing through letters and associated paperwork, fostering a unique connection beyond traditional means. There is no central place, like a stock exchange, like there is in a capital market.

Market’s Part

There are many different banks that make up a money market. There are private banks, central banks, non-banking financial institutions, discount and acceptance houses, and other types of financial institutions. In this business, commercial banks are often the ones to keep an eye on.


When did India’s Financial Market First Open?

India launched MMMFs in April 1991, diversifying short-term investment options and simplifying money market access for individual investors.

What Changes are being Made to the Indian Financial System?

The Reserve Bank of India (RBI) has put out a lot of new money market goods to make the Indian money market bigger and more diverse. These new money market assets include commercial paper, certificates of deposit, and treasury bills with terms of 182 and 364 days. Governments, commercial banks, financial institutions, and corporations, among others, can use these goods to get money from the money market.

Which of these is the most Vital Part of India’s Financial System?

To do what it’s supposed to do, the system needs to let both buyers and sellers of short-term funds clear the market at a price that meets both their investing and financing needs. The Reserve Bank of India, also called the RBI, is a very important part of India’s banking markets.


Once the organized and unregulated sectors are brought together, the money market will be more sensitive to changes in monetary policy and be able to react in the right way. Once the money market totally integrate, the RBI will be able to control, regulate, direct, and give advice on all of its parts. To conclude, the topic of characteristics of indian money market is of paramount importance for a better future.

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