Indian Financial Market

What is Dematerialization?

Indian investor community has undergone sea changes in the past few years. India now has a very large investor population and ever increasing volumes of trades. However, this continuous growth in activities has also increased problems associated with stock trading. Most of these problems arise due to the intrinsic nature of paper based trading and settlement, like theft or loss of share certificates. This system requires handling of huge volumes of paper leading to increased costs and inefficiencies. Risk exposure of the investor also increases due to this trading in paper.

Some of these risks are :

  • Delay in transfer of shares.
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Financial Sector Reforms in India

In India, a decade old on-going financial reforms have transformed the operating environment of the finance sector from an administrative regime to a competitive market base system.  Since mid-1991, a number of reforms have been introduced in the financial sector in India.  Rangarajan once noted that domestic financial liberalization has brought about the deregulation of interest rates, dismantling of directed credit, reforming the banking system, improving the functioning of the capital market, including the government securities market.  The main emphasis on the financial sector reform has been on the banking system so as to improve the performance of public sector banks.… Read the rest

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Composition and Importance of Money Market

Composition of Money Market

The money market is not a single homogeneous market. It consists of a number of sub-markets which collectively constitute the money market. There should be competition within each sub-market as well as between different sub-markets. The following are the main sub-markets of a money market:

  • Call Money Market.
  • Commercial Bills Market or Discount Market.
  • Acceptance Market.
  • Treasury bill Market.

Indian money market was highly regulated and was characterized by limited number of participants. The limited variety and instruments were available. Interest rate on the instruments was under the regulation of Reserve Bank of India. The sincere efforts for developing the money market were made when the financial sector reforms were started by the government.… Read the rest

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Money Market – Definition, Features and Instruments

As per the definition of Reserve Bank of India, money market is “a market for short terms financial assets that are close substitute for money, facilitates the exchange of money in primary and secondary market”.

Indian money market was highly regulated and was characterized by limited number of participants. The limited variety and instruments were available. Interest rate on the instruments was under the regulation of Reserve Bank of India. The sincere efforts for developing the money market were made when the financial sector reforms were started by the government.

Money markets are the markets for short-term, highly liquid debt securities.… Read the rest

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Features and Objectives of Money Market

Money market is a market for short-term loan or financial assets. It as a market for the lending and borrowing of short term funds. As the name implies, it does not actually deals with near substitutes for money or near money like trade bills, promissory notes and government papers drawn for a short period not exceeding one year. These short term instruments can be converted into cash readily without any loss and at low transaction cost.

Money market is the centre for dealing mainly in short — term money assets. It meets the short-term requirements of borrowers and provides liquidity or cash to lenders.… Read the rest

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Commercial Paper – Definition, Features and Advantages

What is a Commercial Paper?

A commercial paper is an unsecured promissory note issued with a fixed maturity by a company approved by RBI, negotiable by endorsement and delivery, issued in bearer form and issued at such discount on the face value as may be determent by the issuing company.

Features of Commercial Paper
  1. Commercial paper is a short-term money market instrument comprising usince promissory note with a fixed maturity.
  2. It is a certificate evidencing an unsecured corporate debt of short term maturity.
  3. Commercial paper is issued at a discount to face value basis but it can be issued in interest bearing form.
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