Anjan Barua Executive Vice-President Discount and Finance House of India Ltd.Mumbai.
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Description
An efficient money market plays an important role in the financial growth and stability of the country. It works as a sterilizing platform and equilibrates the money. The Indian money market has passed through different phases of reforms which started in 1987. The present state of money market in India, requires an immediate change in terms of its depth and width. The RBI is concentrating on the main issues associated with the Indian money market. Moreover, there is a need for more instruments in this market. Interest Rate Derivatives is a new introduction towards this need. The RBI has set up a Working Group on instruments of sterilization to propose new instrument in money market.
A vibrant financial system demands efficient and dynamic markets in any part of the world. Efficient markets stem from large number of players, good infrastructure, sound and guaranteed settlement platforms, transparent/quick information disseminating channels, and healthy self regulatory mechanism. Money market is no exception. The stability of any market depends on how deep these roots are penetrated, to tap the hidden reservoirs of potential resources. The depth of a market is also gauged on how the chain of distribution channels, product range, and geographical dispersion are percolated down.
Money market in any financial system is like the heart of the human anatomy. It equilibrates the money and acts as a focal point to the Central Bank of the country for its manoeuvring. However, the role of money market cannot be curtailed to just an equilibrating/sterilizing platform. But, they should be deepened and widened to achieve the long-term financial growth and stability objectives of any country. Before, we further discuss on the topic, let us have a look at the basics of money market for a fruitful discussion and understanding.
