The major functions of money market are given below :-

1. To maintain monetary equilibrium. It means to keep a

balance between the demand for and supply of money for
short term monetary transactions.
2. To promote economic growth. Money market can do
this by making funds available to various units in the
economy such as agriculture, small scale industries, etc.
3. To provide help to Trade and Industry. Money market
provides adequate finance to trade and industry.
Similarly it also provides facility of discounting bills of
exchange for trade and industry.
4. To help in implementing Monetary Policy. It provides a
mechanism for an effective implementation of the
monetary policy.
5. To help in Capital Formation. Money market makes
available investment avenues for short term period. It
helps in generating savings and investments in the
economy.
6. Money market provides non-inflationary sources of
finance to government. It is possible by issuing treasury
bills in order to raise short loans. However this dose not
leads to increases in the prices

Features

1. Dichotomic Structure: It is a significant aspect of the

Indian money market. It has a simultaneous existence of both
the organized money market as well as unorganised money
markets. The organized money market consists of RBI, all
scheduled commercial banks and other recognized financial
institutions. However, the unorganized part of the money
market comprises domestic money lenders, indigenous
bankers, trader, etc. The organized money market is in full
control of the RBI. However, unorganized money market
 remains outside the RBI control. Thus both the organized and
unorganized money market exists simultaneously.
2. Seasonality : The demand for money in Indian money
market is of a seasonal nature. India being an agriculture
predominant economy, the demand for money is generated
from the agricultural operations. During the busy season i.e.
between October and April more agricultural activities takes
place leading to a higher demand for money.
3. Multiplicity of Interest Rates : In Indian money market,
we have many levels of interest rates. They differ from bank
to bank from period to period and even from borrower to
borrower. Again in both organized and unorganized segment
the interest rates differs. Thus there is an existence of many
rates of interest in the Indian money market.
4. Lack of Organized Bill Market : In the Indian money
market, the organized bill market is not prevalent. Though the
RBI tried to introduce the Bill Market Scheme (1952) and then
New Bill Market Scheme in 1970, still there is no properly
organized bill market in India.
5. Absence of Integration : This is a very important feature
of the Indian money market. At the same time it is divided
among several segments or sections which are loosely
connected with each other. There is a lack of coordination
among these different components of the money market. RBI
has full control over the components in the organized
segment but it cannot control the components in the
unorganized segment.
6. High Volatility in Call Money Market : The call money
market is a market for very short term money. Here money is
demanded at the call rate. Basically the demand for call
money comes from the commercial banks. Institutions such
as the GIC, LIC, etc suffer huge fluctuations and thus it has
remained highly volatile.
7. Limited Instruments : It is in fact a defect of the Indian
money market. In our money market the supply of various
instruments such as the Treasury Bills, Commercial Bills,
Certificate of Deposits, Commercial Papers, etc. is very
 limited. In order to meet the varied requirements of borrowers
and lenders, It is necessary to develop numerous
instruments.

Defects or Drawbacks of Indian Money Market ↓

Though the Indian money market is considered as the

advanced money market among developing countries, it still
suffers from many drawbacks or defects. These defects limit
the efficiency of our market.

Some of the important drawbacks of Indian Money Market

are :-
1. Absence of Integration : The Indian money market is
broadly divided into the Organized and Unorganized Sectors.
The former comprises the legal financial institutions backed
by the RBI. The unorganized statement of it includes various
institutions such as indigenous bankers, village money
lenders, traders, etc. There is lack of proper integration
between these two segments.
2. Multiple rate of interest : In the Indian money market,
especially the banks, there exists too many rates of interests.
 These rates vary for lending, borrowing, government
activities, etc. Many rates of interests create confusion among
the investors.
3. Insufficient Funds or Resources : The Indian economy
with its seasonal structure faces frequent shortage of financial
recourse. Lower income, lower savings, and lack of banking
habits among people are some of the reasons for it.
4. Shortage of Investment Instruments : In the Indian
money market, various investment instruments such as
Treasury Bills, Commercial Bills, Certificate of Deposits,
Commercial Papers, etc. are used. But taking into account the
size of the population and market these instruments are
inadequate.
5. Shortage of Commercial Bill : In India, as many banks
keep large funds for liquidity purpose, the use of the
commercial bills is very limited. Similarly since a large number
of transactions are preferred in the cash form the scope for
commercial bills are limited.
6. Lack of Organized Banking System : In India even
through we have a big network of commercial banks, still the
banking system suffers from major weaknesses such as the
NPA, huge losses, poor efficiency. The absence of the
organized banking system is major problem for Indian money
market.
7. Less number of Dealers : There are poor number of
dealers in the short-term assets who can act as mediators
between the government and the banking system. The less
number of dealers leads to the slow contact between the end
lender and end borrowers

Reforms

1. Deregulation of the Interest Rate : In recent period the

government has adopted an interest rate policy of liberal
nature. It lifted the ceiling rates of the call money market,
 short-term deposits, bills rediscounting, etc. Commercial
banks are advised to see the interest rate change that takes
place within the limit. There was a further deregulation of
interest rates during the economic reforms. Currently interest
rates are determined by the working of market forces except
for a few regulations.
2. Money Market Mutual Fund (MMMFs) : In order to
provide additional short-term investment revenue, the RBI
encouraged and established the Money Market Mutual Funds
(MMMFs) in April 1992. MMMFs are allowed to sell units to
corporate and individuals. The upper limit of 50 crore
investments has also been lifted. Financial institutions such
as the IDBI and the UTI have set up such funds.
3. Establishment of the DFI : The Discount and Finance
House of India (DFHI) was set up in April 1988 to impart
liquidity in the money market. It was set up jointly by the RBI,
Public sector Banks and Financial Institutions. DFHI has
played an important role in stabilizing the Indian money
market.
4. Liquidity Adjustment Facility (LAF) : Through the LAF,
the RBI remains in the money market on a continue basis
through the repo transaction. LAF adjusts liquidity in the
market through absorption and or injection of financial
resources.
5. Electronic Transactions : In order to impart transparency
and efficiency in the money market transaction the electronic
dealing system has been started. It covers all deals in the
money market. Similarly it is useful for the RBI to watchdog
the money market.
6. Establishment of the CCIL : The Clearing Corporation of
India limited (CCIL) was set up in April 2001. The CCIL clears
all transactions in government securities, and repose reported
on the Negotiated Dealing System.
7. Development of New Market Instruments : The
government has consistently tried to introduce new short-term
investment instruments. Examples: Treasury Bills of various
duration, Commercial papers, Certificates of Deposits,
 MMMFs, etc. have been introduced in the Indian Money
Market.

Objectives of Monetary Policy ↓

The objectives of a monetary policy in India are similar to the

objectives of its five year plans. In a nutshell planning in India
aims at growth, stability and social justice. After the Keynesian
revolution in economics, many people accepted significance of
monetary policy in attaining following objectives.

1. Rapid Economic Growth

2. Price Stability
3. Exchange Rate Stability
4. Balance of Payments (BOP) Equilibrium
5. Full Employment
6. Neutrality of Money
7. Equal Income Distribution

These are the general objectives which every central bank of a

nation tries to attain by employing certain tools (Instruments) of
a monetary policy. In India, the RBI has always aimed at the
controlled expansion of bank credit and money supply, with
special attention to the seasonal needs of a credit. Let us now
see all these objectives in detail.

1. Rapid Economic Growth : It is the most important

objective of a monetary policy. The monetary policy can
influence economic growth by controlling real interest rate and
its resultant impact on the investment. If the RBI opts for a
cheap or easy credit policy by reducing interest rates, the
investment level in the economy can be encouraged. This
 increased investment can speed up economic growth. Faster
economic growth is possible if the monetary policy succeeds
in maintaining income and price stability.
2. Price Stability : All the economics suffer from inflation
and deflation. It can also be called as Price Instability. Both
inflation are harmful to the economy. Thus, the monetary
policy having an objective of price stability tries to keep the
value of money stable. It helps in reducing the income and
wealth inequalities. When the economy suffers from recession
the monetary policy should be an 'easy money policy' but
when there is inflationary situation there should be a 'dear
money policy'.
3. Exchange Rate Stability : Exchange rate is the price of a
home currency expressed in terms of any foreign currency. If
this exchange rate is very volatile leading to frequent ups and
downs in the exchange rate, the international community
might lose confidence in our economy. The monetary policy
aims at maintaining the relative stability in the exchange rate.
The RBI by altering the foreign exchange reserves tries to
influence the demand for foreign exchange and tries to
maintain the exchange rate stability.
4. Balance of Payments (BOP) Equilibrium : Many
developing countries like India suffers from the Disequilibrium
in the BOP. The Reserve Bank of India through its monetary
policy tries to maintain equilibrium in the balance of
payments. The BOP has two aspects i.e. the 'BOP Surplus'
and the 'BOP Deficit'. The former reflects an excess money
supply in the domestic economy, while the later stands for
stringency of money. If the monetary policy succeeds in
maintaining monetary equilibrium, then the BOP equilibrium
can be achieved.
5. Full Employment : The concept of full employment was
much discussed after Keynes's publication of the "General
Theory" in 1936. It refers to absence of involuntary
unemployment. In simple words 'Full Employment' stands for
a situation in which everybody who wants jobs get jobs.
However it does not mean that there is a Zero unemployment.
 In that senses the full employment is never full. Monetary
policy can be used for achieving full employment. If the
monetary policy is expansionary then credit supply can be
encouraged. It could help in creating more jobs in different
sector of the economy.
6. Neutrality of Money : Economist such
as Wicksted, Robertson have always considered money as
a passive factor. According to them, money should play only a
role of medium of exchange and not more than that.
Therefore, the monetary policy should regulate the supply of
money. The change in money supply creates monetary
disequilibrium. Thus monetary policy has to regulate the
supply of money and neutralize the effect of money
expansion. However this objective of a monetary policy is
always criticized on the ground that if money supply is kept
constant then it would be difficult to attain price stability.
7. Equal Income Distribution: Many economists used to
justify the role of the fiscal policy is maintaining economic
equality. However in recent years economists have given the
opinion that the monetary policy can help and play a
supplementary role in attainting an economic equality.
Monetary policy can make special provisions for the neglect
supply such as agriculture, small-scale industries, village
industries, etc. and provide them with cheaper credit for
longer term. This can prove fruitful for these sectors to come
up. Thus in recent period, monetary policy can help in
reducing economic inequalities among different sections of
society.

Instruments or technique of credit control / monetary

policy:-

1. Bank Rate 

Bank rate is that rate which is charged by Central bank for

issue loan to the member banks.  By changing it, central bank
can control the credit. 
→ If Central bank increase this bank rate, all commercial banks
will increase their interest rate by this loan become costly and
flow of fund in the form of credit will decrease.

→ If central bank wants to expand credit, then Central bank will

decrease bank rate, after this commercial bank can get
advance and loan at cheap rate and by this way, they also
decrease their interest rate. After this flow of cash in the form of
loan will increases.

2. Open Market Operation 

Open market operation is the all action which is done by central

bank for purchase and sale of member banks' security in open
market. If RBI wants to contract the credit, then RBI will sell the
security of member bank and member bank's flow of cash will
stop. If RBI wants to expand credit in recession, then RBI will
start to buy the security of member banks and member banks
get cash and they can now use it for providing more loans to
customers.

3. Cash Reserve Ratio / Statutory minimum reserve:-

Cash reserve ratio is the minimum percentage of the deposit to

be kept as reserve by the banks with central bank. It can be
used as the technique of monetary policy. By changing cash
reserve ratio, RBI can contract or expand credit in Indian
economy. 

→ If RBI wants to contract credit, and then RBI will increase

this ratio. After this all banks have to keep more fund as
reserve with RBI. So, they will decrease the amount of loan due
to decrease the total fund available for enterprises. 
 → If RBI wants to expand credit, then RBI will decrease this
ratio, after this all banks have to keep less fund as reserve with
RBI. So, they will issue more credit to public. 

4. Changes in Marginal Requirement of loan:-

Marginal requirement is the difference between value of

security and actual loan accepted by bank. Suppose a person
wants to take loan of Rs. 80 , we has to give security of Rs. 100
then marginal requirement is Rs. 100 - Rs. 80  = Rs. 20 . 

→ If RBI wants to contract the credit , this rate will increase

suppose , if RBI fixes it as 40 % , then customer can get loan of
Rs. 60 after giving security of Rs. 100 . So , trend of getting
loan will decrease . 

→ If RBI wants to expand the credit, this rate will decrease
suppose, if RBI fixes it as 10% more people will take loan , if
they get Rs. 90 in cash after giving security of Rs. 100 .

So , by this way RBI controls credit . 

5. Moral Persuasion / Inspiration 

RBI as central bank of country can control credit with moral

persuasion. Under this persuasion, RBI can call a meeting of all
commercial bank and give advice in discussion that they should
not give loan for speculative purposes.

6. Rationing of Credit 

RBI has right to create ration of credit under monetary policy. It

can be done by following way:-

 To fix the amount of loan for a particular bank. 

 To fix Quota for all banks. 
 To fix Quota for different traders.
 7. Regulation of consumer credit 

→ In case inflation, prices are increased. To control prices

central bank contract credit to reduce the total amount of
installment for payment. 

→ In case of deflation, prices are decreased to control prices

central bank expand credit to increase the amount of
installment. 

The major changes in the Indian Monetary policy during the decade of
1990.
1. Reduced Reserve Requirements : During 1990s both the Cash
Reserve Ratio (CRR) and the Statutory Liquidity Ratio (SLR) were
reduced to considerable extent. The CRR was at its highest 15% plus
and additional CRR of 10% was levied, however it is now reduced by
4%. The SLR is reduced form 38.5% to a minimum of 25%.
2. Increased Micro Finance : In order to strengthen the rural finance
the RBI has focused more on the Self Help Group (SHG). It comprises
small and marginal farmers, agriculture and non-agriculture labour,
artisans and rural sections of the society. However still only 30% of the
target population has been benefited.
3. Fiscal Monetary Separation : In 1994, the Government and the
RBI signed an agreement through which the RBI has stopped
financing the deficit in the government budget. Thus it has seperated
the Monetary policy from the fiscal policy.
4. Changed Interest Rate Structure : During the 1990s, the interest
rate structure was changed from its earlier administrated rates to the
market oriented or liberal rate of interest. Interest rate slabs are now
reduced up to 2 and minimum lending rates are abolished. Similarly,
lending rates above Rs. Two lakh are freed.
5. Changes in Accordance to the External Reforms : During the
1990, the external sector has undergone major changes. It comprises
lifting various controls on imports, reduced tariffs, etc. The Monetary
 policy has shown the impact of liberal inflow of the foreign capital and
its implication on domestic money supply.
6. Higher Market Orientation for Banking : The banking sector got
more autonomy and operational flexibility. More freedom to banks for
methods of assessing working funds and other functioning has
empowered and assured market orientation

Evaluation of the Monetary Policy in India

During the reforms though the Monetary policy has achieved

higher success in the Monetary policy, it is not free from
limitation or demerits. It needs to be evaluated on a proper
scale.
1. Failed in Tackling Budgetary Deficit : The higher level
of the budget deficit has made the Monetary policy ineffective.
The automatic monetization of the deficit has led to high
Monetary expansion.
2. Limited Coverage : The Monetary policy covers only
commercial banking system leaving other non-bank
institutions untouched. It limits the effectiveness of the
monitor policy in India.
3. Unorganized Money Market : In our country there is a
huge size of the unorganized money market. It dose not come
under the control of the RBI. Thus any tools of the Monetary
policy dose not affect the unorganized money market making
Monetary policy less affective.
4. Predominance of Cash Transaction : In India still there
is huge dominance of the cash in total money supply. It is one
of the main obstacles in the effective implementation of the
Monetary policy. Because Monetary policy operates on the
bank credit rather on cash.
5. Increase Volatility : As the Monetary policy has adopted
changes in accordance to the changes in the external sector
in India, it could lead to a high amount of the volatility.
There are certain drawbacks in the working of the Monetary
Policy in India. However, during the economic reforms it has
got different dimensions.

Objectives Behind Nationalisation of Banks in India

The nationalization of commercial banks took place with an aim

to achieve following major objectives.
1. Social Welfare : It was the need of the hour to direct the
funds for the needy and required sectors of the indian
economy. Sector such as agriculture, small and village
industries were in need of funds for their expansion and
further economic development.
2. Controlling Private Monopolies : Prior to nationalization
many banks were controlled by private business houses and
corporate families. It was necessary to check these
monopolies in order to ensure a smooth supply of credit to
socially desirable sections.
3. Expansion of Banking : In a large country like India the
numbers of banks existing those days were certainly
inadequate. It was necessary to spread banking across the
country. It could be done through expanding banking network
(by opening new bank branches) in the un-banked areas.
4. Reducing Regional Imbalance : In a country like India
where we have a urban-rural divide; it was necessary for
banks to go in the rural areas where the banking facilities
were not available. In order to reduce this regional imbalance
nationalisation was justified:
5. Priority Sector Lending : In India, the agriculture sector
and its allied activities were the largest contributor to the
national income. Thus these were labeled as the priority
sectors. But unfortunately they were deprived of their due
 share in the credit. Nationalization was urgently needed for
catering funds to them.
6. Developing Banking Habits : In India more than 70%
population used to stay in rural areas. It was necessary to
develop the banking habit among such a large population.

Demerits, Limitations - Bank Nationalisation in India

Though the natinalisation of commercial banks was undertaken

with tall objectives, in many senses it failed in attaining them. In
fact it converted many of the banking institutions in the loss
making entities. The reasons were obvious lethargic working,
lack of accountability, lack of profit motive, political interference,
etc. Under this backdrop it is necessary to have a critical look to
the whole process of natinalisation in the period after bank
natinalisation.

The major limitations of the bank nationalization in India are:-

1. Inadequate banking facilities : Even though banks have
spread across the country; still many parts of the country are
unbanked. Especially in the backward states such as the
Uttar Pradesh, Madhya Pradesh, Chhattisgarh and north-
eastern states of India.
2. Limited resources mobilized and allocated : The
resources mobilized after the nationalization is not sufficient if
we consider the needs of the Indian economy. Some times
the deposits mobilized are enough but the resource allocation
is not as per the expansions.
3. Lowered efficiency and profits : After nationalization
banks went in the government sector. Many times political
forces pressurized them. Banking was not done on a
professional and ethical grounds. It resulted into lower
efficiency and poor profitability of banks.
4. Increased expenditure : Due to huge expansion in a
branch network, large staff administrative expenditure, trade
 union struggle, etc. banks expenditure increased to a
dangerous levels.
5. Political and Administrative Inference : Many public
sector banks badly suffered due to the political interference. It
was seen in arranging loan meals. It ultimately resulted in
huge non-performing assets (NPAs) of these banks and
inefficiency.

These are several limitations faced by the bank natinalisation in

India.

Apart from this there are certain other limitations as well, such
as weak infrastructure, poor competitiveness, etc.
Significance, Role or Functions of Capital Market

Like the money market capital market is also very important. It

plays a significant role in the national economy. A developed,
dynamic and vibrant capital market can immensely contribute
for speedy economic growth and development.

Let us get acquainted with the important functions and role of

the capital market.
1. Mobilization of Savings : Capital market is an important
source for mobilizing idle savings from the economy. It
mobilizes funds from people for further investments in the
productive channels of an economy. In that sense it activate
the ideal monetary resources and puts them in proper
investments.
2. Capital Formation : Capital market helps in capital
formation. Capital formation is net addition to the existing
stock of capital in the economy. Through mobilization of ideal
resources it generates savings; the mobilized savings are
made available to various segments such as agriculture,
industry, etc. This helps in increasing capital formation.
3. Provision of Investment Avenue : Capital market raises
resources for longer periods of time. Thus it provides an
investment avenue for people who wish to invest resources
for a long period of time. It provides suitable interest rate
returns also to investors. Instruments such as bonds, equities,
units of mutual funds, insurance policies, etc. definitely
provides diverse investment avenue for the public.
1. Speed up Economic Growth and
Development : Capital market enhances
production and productivity in the national
economy. As it makes funds available for long
period of time, the financial requirements of
business houses are met by the capital market.
It helps in research and development. This
helps in, increasing production and productivity
in economy by generation of employment and
development of infrastructure.
4. Proper Regulation of Funds : Capital markets not only
helps in fund mobilization, but it also helps in proper allocation
of these resources. It can have regulation over the resources
so that it can direct funds in a qualitative manner.
5. Service Provision : As an important financial set up
capital market provides various types of services. It includes
long term and medium term loans to industry, underwriting
services, consultancy services, export finance, etc. These
services help the manufacturing sector in a large spectrum.
6. Continuous Availability of Funds : Capital market is
place where the investment avenue is continuously available
for long term investment. This is a liquid market as it makes
fund available on continues basis. Both buyers and seller can
easily buy and sell securities as they are continuously
available. Basically capital market transactions are related to
the stock exchanges. Thus marketability in the capital market
becomes easy.
These are the important functions of the capital market.
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its creative media marketing

and this is their client in delh

 they seem disoriented with the target segment....simple page though which is good but a lil too simple
how's the college comin along?

i don't mind workin for them.....if they're lookin for feedbacks......then reduce the number of customer feedback they
got....makes it look scripted rather than real comments
key differentiator is zip-lining....rare in india
so market that
focus that
try n figure out who exactly their client wants to market this to....sellt he service too......
is it foreigners/local crowd......adventure enthusiasts? tourists??
who exacty....not clear in the marketing theme
it feels as though rahter than puttin in their creativity they basically just listned to the client n made the page....it
should be the other way around....their creativity, should be told to the clients and the clients should be persuaded

hey himanshu i gave d link of d page of ur client to sum frnz of mine....ders one cousin of mine, he
belongs to rajasthan , now a dayz in torento doin his mba frm university of torento.....he has sum
criticism as well as sum suggestion of ur mrketing techniques....yesterday wen i was chattin with my
cousin he sent me sum suggestions i m passin u d same...he says..." they seem disoriented with the
target segment....simple page though which is good but a lil too simple

how's the college comin along?

i don't mind workin for them.....if they're lookin for feedbacks......then reduce the number of
customer feedback they got....makes it look scripted rather than real comments

key differentiator is zip-lining....rare in india

so market that

focus that

try n figure out who exactly their client wants to market this to....sellt he service too......

is it foreigners/local crowd......adventure enthusiasts? tourists??

who exacty....not clear in the marketing theme

it feels as though rahter than puttin in their creativity they basically just listned to the client n made
the page....it should be the other way around....their creativity, should be told to the clients and the
clients should be persuaded"

i hope its of sum value to u...if u want u may tok to him thru fb chat.....tell me if u r interested

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