Ask NiyaThe money market plays a pivotal role in the deployment of short-term funds and serves as a key indicator of liquidity and interest rate trends in the economy.
It is a segment of the financial market where highly liquid instruments with very short-term maturities are traded.
Due to their high liquidity and short duration, money market instruments are considered low-risk and are treated as safe investments.
The money market deals with short-term obligations such as:
Treasury Bills (T-Bills)
Commercial Papers (CPs)
Certificates of Deposit (CDs)
Banker’s Acceptances
The money market facilitates the efficient transfer of short-term funds between lenders/investors and borrowers.
For lenders or investors, it offers a relatively safe avenue with fair returns for surplus funds.
It serves as the primary mechanism for the Reserve Bank of India (RBI) to intervene and influence liquidity and interest rates in the economy.
The RBI is the most important participant in the money market and uses it to ensure that short-term interest rates and liquidity levels align with the monetary policy objectives.
These instruments cater to the short-term credit requirements of borrowers and provide liquidity to lenders.
Ask Niya