What is Money Market ? Explain it's function.
Definition: Crouther defined the money market as a collective name given to the various firms and institutions that deal with various grades of near-money)
The Reserve Bank of India defined money market as "the centre for dealing mainly of a short-term character, in monetary assets, it meets the short-term requirements of borrowers and provides liquidity or cash to the lenders".
Money market does not have a particular place to transact with. The participants can transact over telephone, internet etc.
Function of Money Market: The functions of Money Market are as follows:
1. It is an equilibrating mechanism to even out demand for the supply of short-term funds
2. It provides a focal point for central bank intervention and influencing liquidity and the general level of interest rates in the economy.
3. It enables a reasonable access to providers and users of short-term funds to fulfill their borrowing and investment requirements at an efficient and market clearing price.
Read Notes :- Current Assets & liabilities
Besides these functions, the money market performs the following other functions also:
1) It provides short-term credit to the business to meet the working capital requirements.
2) It's funds the Government by issuing short-term instruments to the savers.
3) It deals with credit instruments.
4) It enables the savers of the funds and investors to transact with each other.
5) It helps trade and commerce to develop in a better manner, by issue of bills.
6) It helps in promoting the saving habit among the people as they earn interest/discount when they invest their savings in credit instruments.
7) It provides valuable and accurate information to the transacting parties to save money, time and efforts.