ORGANIZED MONEY MARKET - Accounts and Finance for Managers

Organised Money Market Meaning

The organised money market can be further segmented into two categories:

Market for Banking Financial Institutions

Under this the entire banking network is administered by RBI, which has the following many more classification viz Public sector banks, Scheduled banks, Private sector bank, Co-operative banks, Regional Rural banks and Land development banks

Market for Non Banking Financial Institutions

The non banking financial institutions are nothing but development banks, state financial institutions
The money market is further divided into various segments viz
Bills market
Discounting market
Acceptance market
Marketable securities market
Gilt edged securities market and so on

Bill market: In this market only, the bills are bought and sold among the players. It is the market for both commerce bill and finance bill. The commerce bill is nothing but the bill of exchange defined in accordance with the Sec. 5 of the Negotiable Instruments Act. It arises only due to credit sales among the parties, only in order to safeguard the interest of the suppliers who supplied the goods and articles on credit.

Discounting market: It is another most important market for discounting of the bills of the trade. These are normally carried out by the banking and financial institutions in addition to Discounting Housing Finance of India which is the apex body for rediscounting in India next to Reserve Bank of India. The bills are discounted by the banking and non banking financial institutions only on the basis of the credibility of the parties involved in the bill who has accepted to make the payment on the maturity of the bill.

Acceptance market: In India, there is no separate acceptance market for accepting the bills before discounting, but in U.K., there is greater scope for accepting the bill before the process of discounting. Normally, the discounting is carried out only on the basis of the extent of acceptance given by the acceptance houses on the bills produced.

Govt Securities market: The govt securities are also tradable in the secondary market immediately after the issuance. According to the Public debt act, the central and state govt are empowered to issue the securities to raise financial resources from the public for developmental aspects of the state or region.
The treasury bills are mainly traded in the market immediately after the issuance

The following are the major type of treasury bills traded in the market are 91 days treasury bills, 182 days treasury bill and 364 days treasury bill

Bonds market: It is a separate market available to raise the financial resources through long term debt instrument. The bonds are normally issued by the corporate sectors and govt organizations. They are many in categories viz
Secured and unsecured bonds
Pay in kind bonds
Redeemable bonds and irredeemable bonds and so on.

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