FEATURES OF MONEY MARKET :

The money market is a wholesale market where the volumes of transactions is very large and is settled on a daily basis. Trading in the money market is conducted over the telephone, followed by written confirmation through e mails, texts from the borrowers and lenders.

There are a large number of participants in the money market: commercial banks, mutual funds, investmen  institutions, financial institutions and finally the Reserve Bank of India. The bank’s operations ensure that the liquidity and short-term interest rates are maintained at levels consistent with the objective of maintaining price and exchange rate stability. The Central bank occupies a strategic position in the money market. The money market can obtain funds from the central bank either by borrowing or through sale of securities. The bank influences liquidity and interest rates by open market operations, REPO transactions changes in Bank Rate, Cash Reserve Requirements and by regulating access to its accommodation. A well-developed money market contributes to an effective implementation of the monetary policy. It provides:

1. A balancing mechanism for short-term surpluses and deficiencies.

2. A focal point of central bank intervention for influencing liquidity in the economy, and

3. A reasonable access to the users of short-term funds to meet their requirements at realistic/reasonable price or cost.